According to posts on Twitter, Boris Johnson has signed up online loan company Wonga to sponsor free travel on New Year’s Eve.
The news is interesting because Transport for London’s press release announcing the release of the Christmas Travel guide made no mention of sponsorship, a huge difference with past years.
Maybe TfL’s shyness is down to some very negative perceptions people have about a company offering short term loans on a typical APR of 2689% (the company’s website goes to great pains to point out that “APR is not the same as actual interest charged”).
City Hall haven’t yet responded to my enquiries about the reported deal, when/if they do I’ll include their comments.
In the meantime it’s maybe worth recalling a time when Boris thought it wrong for the poor and needy to subsidise travel in the capital.
If you travel on New Year’s Eve please consider paying your own fare rather than letting the needy pay it for you.
UPDATE: The Mayor’s press office passed my enquiry to TfL who, as well as confirming “agreement was reached last week” for the deal, sent the following statement:
“Transport for London (TfL) each year seeks support for the provision of free travel on New Year’s Eve between 11.45pm and 4:30am.
Wonga.com is making a contribution in support of free travel for this New Year’s Eve, and is licensed by the Office of Fair Trading and regulated by the Consumer Credit Act 1974.”
UPDATE 2: London Assembly Members Darren Johnson, Jenny Jones and Jennette Arnold have all criticised the acceptance of Wonga.com as a sponsor while Labour MP Stella Creasy, who is campaigning for caps on the cost of borrowing, has written to the Mayor asking him to “change his mind” over the deal.
PS: More on this from Adam
alan says
How much is the contribution they are making?
Stella Creasy says
Have written to Boris asking him to change his mind on this given their opposition to the Consumer Credit Regulation and Advice Bill – details here
Peter Hulme Cross says
I didn’t always agree with former colleagues Darren Johnson, Jenny Jones and Jeanette Arnold when I was an Assembly Member but I certainly do this time.
It is totally wrong to have a loans company which charges interest at ‘typical 2689%APR’ as it says on its website sponsoring travel on the Tube on New Year’s Eve. It sends out completely the wrong message. I am surprised at Boris and TfL for arranging this and thought they had better judgment.
Boris and TfL need to re-think this one. Failing that, I agree with Martin Hoscik when he says “If you travel on New Year’s Eve please consider paying your own fare rather than letting the needy pay it for you.”
Fred says
Not sure about the logic that a Wonga customer is ‘needy’. No business will succeed lending to people who do not pay back. Perhaps they are actually creditworthy and gainfully employed people who are sick and tired of being told ‘the computer says no’ by the banks when they need some small amount to tie them over?
Martin Hoscik says
Fred, I think anyone taking a loan to pay their gas or council tax bill – and their website has a whole page offering to do just that – classes as ‘needy’.
No-one should be taking out interest bearing loans for the paying of utility or council tax bills. Anyone unable to pay their monthly CT instalment is normally able to get extra time from their council, they should not be incurring interest and increasing their debt levels by borrowing to make the payment.
Jamie says
Hiya all,
This is a very very silly and shot sighted campaign from someone who appears to have no understanding of what APR means or how it’s calculated. If they did understand such things they would realize that APR is a really bad metric for short term loans.
APR is useless for short term loans as it actully compounds the interest byond the actual loan. Apr was not designed for comparing short term things. Wonga have a whole page explaining this, but some idiot who thinks they understand the maths has decided that as the number comes out so high they must be evil!
Wonga is much much cheaper than anything on the high street (think cash converters and the like), it’s also a fraction of the cost of an unauthorised overdraft. If your issue is simply cash flow (eg day you get paid changes, you need to find 6 days living money) or you need another SHORT term loan they are one of the best providers around.
Now, as your all so sure you not being tricked with huge rates, what’s the cost if you go £50 into YOUR unauthorised overdraft? How much do you get charged, then what is the actual interest you pay? See all of a sudden the bank is not so cheap and very opaque.
So let’s review, the APR metric is great for comparing like to like products, it’s not great for comparing non like for like project. As a mathematical formula it is terrible for (and not designed for) short term loans which is all wonga offer (max of 31 days).
Take the APR out of the thought process for one moment and consider tha actual cost, lower than any bank, lower than other provides, you pay less if you can pay it back quicker and it’s very fast to sort out.
As someone who use to rely on these services I’m speaking from experience, something I feel most of thie outraged people are somewhat lacking.
Cheers,
Jamie
(note to moderators, am writing this on on the move, so apologies for any bad grammar and spelling. )
IanVisits says
While in a purely technical basis, APR is indeed flawed as a calculator for short-term loans, it is however very valid as a calculator for customers who take out multiple short-term loans which in aggregate add up to a de facto long term loan even it is not a de jure long term loan.
Many people trapped into a situation where they need a short term loan at the end of the month will often find themselves in the same situation for many months, and the situation is compounded, not assisted, by the high cash amount added to the loan repayment.
While it is true that a short-term loan from Wonga is cheaper than financing from a bank, that is not because Wonga has developed some amazing low-cost service, but because banks simply don’t cater to the market (yet). It would be a bit like saying a loan shark is a good deal, simply because banks don’t collect cash at the home of the debtor.
I am surprised the Mayor’s office accepted the sponsorship knowing that it would be a “red flag” to activists. Even if it is a good transport policy, the sponsorship deal is poor politics.