Michael Drummond reveals National Union of Students' (NUS) criticism of a loan campaign by Wonga - aimed at cash-strapped students.
Following criticism from the National Union of Students (NUS), short term loan company Wonga has removed material from their website which appeared to be targeting students.
Pete Mercer, NUS Vice President (Welfare), had said: “It is highly irresponsible of any company to suggest to students that high-cost short-term loans be a part of their everyday financial planning.” He described Wonga’s targeting of students as “predatory marketing”.
Wonga had been advertising as an alternative to government backed student loans. Like many other payday loan companies, Wonga make their money by loaning money to customers whose payday comes after any bills need to be paid. Like any loan, the company’s profit is derived from the interest they charge when the customer pays the money back.
Currently, government loans are paid back after your income surpasses £15,000. 9% of your salary above this figure goes towards repaying your debt. For courses starting in September 2011, the high street banks’ interest rate was around 1.5%. By contrast, Wonga’s interest rates are infamous, currently 4,214% APR. This, in real terms, would mean if you borrow £1 for a day you will have to pay back £6.56. Considering that tuition fees are currently £3,375, soon to be raised to £9,000, the NUS was responding to student concerns about how dangerous these payday loans companies could be.
The page has now been taken down permanently and an apology from Wonga has been put in its place. They have put the criticism down to “misunderstandings,” stating: “We would like to clarify that Wonga does not target students. Yet we do not discriminate against working, adult students who may choose to apply either, because all applications are assessed in the same robust and completely objective way.”
However, the statement also pointed out that the main purpose was meant to be to optimise their position on search engines. This gives rise to the question: are thousands of students potentially spiralling into mountains of debt, and is this a fair trade for a better ranking on Google?