Along with many others I was initially outraged when the ‘rip off finance company to sponsor toon’ story first broke – speculation as to the ground being called the wonga stadium fuelled the local press as well as local and national radio phone-in programs for a few days before the official announcement was actually made; and then the PR masterstroke – wonga had taken the corporate decision to give the stadium name ‘back to the fans’ and rename it St James’ Park.
It didn’t really matter that every single one of us who trudge through the turnstiles week after week have never stopped calling it that or indeed several local newspapers and more importantly Gabby Logan, but somehow it just made everyone feel that little bit better – as if somehow we’d managed to get one over Mike Ashley and Derek Lambias.
Personally I quite liked the idea of turning up at the wongarena – it just rolls nicely off the tongue and makes me think of going to watch my favourite team on a nice sunny day in some colonial backwater, sitting back in the sun with a lager in hand and cheering the boys on.
Maybe I’m missing something but shirt sponsorship in sport appears to be a bit of a waste of money if the truth be told. Many large companies shell out large sums of money to have their name displayed across 11 shirts running around a football pitch once or twice a week. That same name flashes around the stadium advertising hoardings for 90 minutes and is then displayed behind all and sundry during after match interviews, but does it really work?
As it happens I recognise some (but certainly not all – what the hell is Aurasma?) of the brand names but the fact that Andy Carroll (yes him again) is running around with SBOBet on his shirt is never going to make me open an account with them and part with some of my hard earned cash. Norwich are sponsored by Aviva but I can only associate that company with those irritating Paul Whitehouse characters on their TV adverts – the shirts raise awareness of the company name but unless I actually know what they do from other forms of advertising or take the trouble to find out then I’m not going to use the company – it seems to me to be a poor return on the not insignificant investment. However, judging by number of companies queuing up to sponsor football clubs then they must feel that there is a return to be gained.
Anyway I digress – the entire point of this piece was to examine the credentials of wonga.com as a fit and proper company to sponsor the toon and hopefully make a considered opinion about the company and its trading practices.
Following several hours research into the company it is quite clear that some of the banner headlines do not quite tell the whole story;
Yes the company offer short term loans (commonly known as payday loans) at an extremely high APR.
However, I suspect the vast majority of those of you who have bothered to stick with me so far don’t have a clue what APR actually means other than it gives you a broad comparison of the cost of borrowing money.
The guys who set up wonga back in 2008 decided to get into the short term loan market in a slightly different way to that of the majority of companies offering similar deals. Historically, the market is extremely risky for banks and other financial institutions due to the high proportion of defaulters who borrow relatively low amounts (usually no more than a few hundred pounds) but due to financial circumstances find themselves unable to repay the loan by the due date. Hence the proliferation of local loan sharks who were quite happy to lend you £10 for a week but would also come round and break a couple of fingers if you were a few days late in paying it back.
Wonga decided to attack the market with a different strategy and developed computer algorithms that filtered out clients who were in real financial trouble and only lent money to those who were in a strong position to repay the loan at the end of the term.
Whilst this was not entirely successful in the initial period the company now has a default percentage of around 7% which is extremely low in this type of loan market.
It is actually a bit of a myth to suggest that they target people who are in financial difficulties, unemployed, living in poverty etc. In actual fact they target people who need money for their own personal reasons on a short term basis but are in a sound position to repay the debt.
Major banks simply cannot afford to take the risk of almost 10% default on their loans as it would put them out of business, so it is clear that there is a niche market for this type of loan however distasteful it might appear to be to many of us.
APR is also a bit of a red herring since the short term nature of the loan compounds the interest payable as if the loan was being repaid over a year when in fact wonga do not offer personal loans over this period of time. A House of Commons committee recently disputed the relevance of APR as a comparison method and proposed to replace it with total cost of credit when displaying figures about loans.
Wonga charge a flat rate of 1% on the sum borrowed per day – maximum loan period is 30 days and the maximum loan is £400 for new customers. So if you borrow £100 for the full 30 days you’ll pay £30 interest – not cheap by any stretch of the imagination but for some people if ticks the boxes and they are happy to go with it. The total cost is laid out in full before accepting the loan and it is down to the individual to take it or leave it.
I would hazard a guess that far more people make use of credit cards to make purchases in their daily lives, with many using more than one card – often borrowing money from one to repay the minimum payment on another. If you chose to purchase an item for £100 using a credit card provided by the Premier League sponsors and only make the minimum repayment every month it would cost you £33 in interest but would take a staggering 2 years and 3 months to repay the debt.
Is either form of credit more morally unacceptable than the other?
Enough of the economics
I don’t remember any outcry from the media or football world when wonga were appointed as sponsors of Blackpool or Hearts
Yes we are a far bigger club than either of them and we seem to attract adverse publicity, particularly from the southern press without any effort at all but there are areas of Edinburgh and Lancashire that suffer social deprivation on a scale equal to anything on Tyneside – does anyone really think that they chose Newcastle because there are rich pickings for them as a loan company up here? I think not.
“They feed on the poor, disadvantaged and vulnerable members of society”
What about Bet365, SBOBet, 32Red, 12Bet and Genting Casinos? – all perfectly legal sponsors of premiership clubs who may or may not prey on vulnerable members of society to get them to part with their money – I’ll leave you to decide.
Finally you might well think that Sunderland are sponsored by some charitable organisation that pumps money into various parts of Africa for the wellbeing of the local population in order to raise living standards, improve the local economy and develop education and medical care etc.
Invest in Africa is indeed a ‘not for profit’ foundation but its founding partner is Tullow Oil, a global oil and gas exploration company with significant business interests in Africa. Invest in Africa is entirely funded by Tullow Oil and had only one employee when it was established.
In effect, Sunderland’s sponsorship deal is with Tullow, a company that have been accused of pocketing wealth from African nations’ resources, and of damaging local business, notably fishing in Ghana, where there are exclusion zones around rigs.