The TV ad was banned because it implied that Wonga’s representative annual percentage rate (APR) of 5853% was 'irrelevant', watchdog Advertising Standards Authority (ASA) said.
The commercial featured an exchange between two puppet characters who said: ‘Right, we're going to explain the costs of a Wonga short-term loan. Some people think they will pay thousands of per cent of interest’.
‘They won't of course - that's just the way annual rates are calculated. Say you borrowed £150 for 18 days, it would cost you £33.49.’
The ASA received 31 complaints that the ad implied the representative APR was irrelevant to a short-term loan. Others said the message was irresponsible, because it encouraged viewers to disregard the average APR and thereby trivialised the decision to take out a short-term loan.
Wonga said its objective had been to transparently explain the total 'true' cost of a short-term Wonga loan, but the ASA upheld the complaints and said the ad must not appear again in its current form.
The decision comes as the payday loan sector is put under tighter scrutiny.
Earlier this month, the Financial Conduct Authority took over regulation of debt management firms from the Office of Fair Trading and warned that a quarter of firms could be closed down if they don’t abide by stricter rules.
From July 1, mandatory checks will be introduced to make sure someone taking out a payday loan can afford it. The FCA has also said it will limit the number of times a customer can roll over a loan, and firms will also be required to give customers information on how they can get free debt advice.
The watchdog said it wanted to deal with extortionate charges and the danger of borrowers being ‘pushed into a cycle of debt’.
Wonga’s TV ad was arguably guilty of encouraging people to think that paying high interest on a short term loan is standard practice. But it isn’t the first time Wonga has been caught doing this. In 2010 the ASA banned a Wonga TV ad which it ruled ‘trivialised the nature of the service' that was 'likely to mislead about the nature and implications of the product'.
Last October an ‘irresponsible’ radio advert was banned because it implied high-interest loans could be taken lightly. Will Wonga listen this time round?