Some Newcastle United fans are unhappy about the lucrative new shirt sponsorship deal the club has concluded with Wonga, the short-term loan company that has been criticised over its high interest rates. Blackpool and Hearts already have deals with Wonga, but Blackpool has a slightly raffish air while Hearts has encountered serious financial problems. Newcastle is an established and major top flight club.
Some Newcastle United fans are unhappy about the lucrative new shirt sponsorship deal the club has concluded with Wonga, the short-term loan company that has been criticised over its high interest rates. Blackpool and Hearts already have deals with Wonga, but Blackpool has a slightly raffish air while Hearts has encountered serious financial problems. Newcastle is an established and major top flight club.
The club are cutting short their present shirt sponsorship deal with Virgin Money, the successors to Northern Rock. It was due to run to the summer of 2014. Richard Branson is not everyone’s cup of tea, but the reputation of the products his company offers is generally high.
Wonga charges a ‘representative’ APR of 4,214 per cent and has been attacked for ‘legal loan sharking’. A Labour Party shadow minister has argued that they should be banned from marketing. Wonga would no doubt argue that they are filling a gap in the market. The typical Wonga loan is £150.
Loan sharks operating in the informal economy can charge even higher rates and may employ crude collection tactics. Indeed, Wonga insist that their service is cheaper than unauthorised overdrafts from banks, provided customers pay back the debt in time.
Ian Lavery, the Labour MP for Wansbeck and a season ticket holder at Newcastle left no doubt about his views: ‘Newcastle United will be sponsored by the money of deprived people up and down the country. If Wonga get this sponsorship through I will not set foot in St. James’s Park [aka the Sports Direct Arena] until it is off the shirts. To have these players running around on that turf endorsing Wonga is an outrage.’
Some reports have claimed that Wonga have purchased the naming rights to the stadium, but this is not the case and what would be a ludicrous name for such an historic stadium has been avoided.
From the point of view of the club’s management they have concluded an excellent commercial deal which helps them towards financial stability and security. However, it is bound to arouse controversy in an area of high unemployment.
The Office of Fair Trading is conducting a comprehensive review of the payday loans sector. The charges it imposes could substantially hit lenders’ margins. Wonga made pre-tax profits of £62.4m last year. They made an average of £26 from each transaction compared with £21 the year before.