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London Mayor Boris Johnson Faces Heat Due To Legal Loan Shark Advertising Deal

by Jim ONeil on December 23, 2010

in Payday Loans News

London’s Mayor Boris Johnson may not be having such a happy holiday. He is facing criticism due to his decision to sell London bus and tube advertising space to a loan company offering 2,689 percent interest rates. In exchange, the company will sponsor five hours of free travel during the new year.

Mayor Johnson, known for being conservative, is facing pressure from debt groups and Labour figures regarding his agreement with a company that engages in “legal loan-sharking” to individuals needing cash. Transport for London, of which Johnson is the chair, announced free travel from New Year’s Eve at 11:45 pm until 4:30 am on New Year’s Day. However, no mention was made of a sponsorship deal with loan company Wonga.com.

Labour MP Stella Creasy has requested that the mayor reconsider this arrangement. She points to the increasing debt levels and rising unemployment among Londoners. Ms. Creasy has been involved in a private members’ bill regarding capping high credit costs and increasing consumer access to affordable credit unions. She has also been successful in lobbying the government for legal money-lending regulation.

According to Ms. Creasy, one-third of all payday loans issued by some companies are provided to Londoners. Many of these borrowers are faced with few alternatives because mainstream banks refuse them credit, so they become a captive market. This makes it even more important for consumers to find reputable payday loan companies offering low interest rates.

Ms. Creasy reported that Wonga.com informed her in November that it opposes a cap on credit costs or levies for funding debt advice. The company, an online lender that issues short-term loans, claims that the interest figure belies the reality due to the short-term nature of its loans. It says that posting that figure on its Web site was merely a legal requirement.

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