Wonga cash in but Newcastle not united
In Newcastle, football has long-proved an important escape. The city retains some of the highest unemployment, debt and insolvency rates in the country. Football will not be an escape any longer.
Newcastle United have recently announced a new £32million, four-year sponsorship deal with money-lending site Wonga, and so a reminder of financial desperation will be plastered all over the Toon Army’s beloved shirts and stadium.
Wonga, criticized for “preying” on the desperate with the promise of instant cash (at an eye-watering interest rate of 4,214% APR), has also pledged to give £1.5m to the club’s academy and Foundation Enterprise Scheme which helps school leavers find employment.
In another slick PR sop, Wonga bosses said they were also “buying” stadium naming rights and “restoring” it to its original name of St James' Park, after owner Mike Ashley dreamt up a deal with his own company to change the name to the Sports Direct Arena a year ago.
A smart move to placate the fans no doubt, but opposition - vocal and vociferous - remains. Michael Martin, editor of the Newcastle United True Faith fanzine, is furious his club is slowly helping further legitimize a company he deems a legal loan-shark.
“St James’ Park belongs to the people of Newcastle - it’s not Wonga’s to give or take. I also find it worrying that Wonga has involved itself with the Foundation, a charitable institution doing great work. This compromises everything.
“Wonga want to normalize what they do, lending at exorbitant rates that can push people into poverty, and we have quite a lot of that already in the North East,” Martin adds. “I think it’s appalling for something that should be an expression of our civic pride to be hi-jacked by these people. It’s shameful they have anything to do with our football club.”
Can concern stop the rise and rise of Wonga? As the recession continues, the company continues to do roaring business: profits rocketed 269% to almost £46million last year. The company was recently forced to take down online information specifically targeting cash-strapped students, and a sponsorship deal with gambling show Red or Black?, set to return to ITV early next year, has also come under fire.
The company argues it merely charges 1% interest a day, and that APR figures are irrelevant because they assume that money is borrowed for a whole year, when Wonga's loans last a maximum of 30 days.
Yet MPs and consumer groups like Citizens Advice have warned more and more people are continuing to fall into a financial spiral as they cover one payday loan debt with another. A Citizens Advice spokeswoman says they are seeing four times as many payday loan problems as 2010.
Barbara Hann, CEO of ACE Credit Unions Services, has more than 20 years experience of working with credit unions in Newcastle. She worries Wonga’s advertising could prove more effective than efforts to let people know there are safer, cheaper, community-orientated ways of getting credit.
“What we really need is a lot more education in schools about money and basic finance. Without that nothing changes, and we leave people exposed to the desperate measures out there.”
Labour MP Stella Creasy is pushing the government for a cost cap on payday loans. It would mean there would be cap on the total lending rates that can be charged for credit (including interest, admin and penalty fees).
“I want pay day lending to work in the UK as it does in most other countries,” she says. “It’s only the government and the industry who are opposing it.”
Back in Newcastle, Michael Martin spells out what is at stake in his city, where football still means more than advertising space. “The money men will never understand the importance of tradition and identity… at the moment there’s a moral vacuum where the only justification is, ‘Does this make any money?’”