The payday loan company, says its PR man, is like taking a black cab rather than a bus – the price difference is worth it. We talk to Wonga users about whether they regret their journeys

Wonga.com's corporate style is unremittingly cheerful. Apply for one of their online loans and, provided your application is successful, you'll get a series of happy messages, dotted with upbeat exclamation marks, giving an account of the progress of the loan. "Great news! The money will be with you in a jiffy." And a little later: "Great news! We can confirm £100.00 has just left Wonga and is winging its way to your bank account at the speed of light (well, extremely fast anyway)." Pay it back, and you'll receive a grateful text that tells you: "Thanks! We've just collected our Wonga repayment without a hitch and we're all smiles."

The company's TV and radio ads have a similarly light-hearted feel. On television, a trio of gurning puppet pensioners dance to house music and explain the attractions of the Wonga model. The company's other key advertising message is transparency, but these advertisements make no mention of the "representative" 4,214% APR applied to loans.

In the four years since the company launched, the business has soared and a total of around 3.5m short-term online loans have been made; the average loan is £260 and the maximum is £1,000, initially for a maximum of 30 days. Wonga's advertising spend has grown from approximately £22,000 in 2009 to £16m in 2011, according to the analysts AC Nielson MMS, and the brand is currently plastered over London's buses and the shirts of Blackpool and Heart of Midlothian football teams.

Wonga describes its concept as a convenient service for an internet-savvy group of consumers, the Facebook generation, people who are used to getting things fast, who feel "disenfranchised" from the traditional banking system. Loans can be made quickly on most smartphones and the money is often delivered to bank accounts in minutes. Staff believe that in time their services will have the same revolutionary impact on banking as Amazon had on the book industry.

Wonga argues that its success stems from a fast, hi-tech service, not previously available. Critics says it is down to extending expensive credit – at an interest rate of 1% a day – to people who are unable to get money through conventional, cheaper avenues. There is a huge disconnect between the Wonga management's view of these services and the view from beyond its headquarters, where campaigners against the rapidly growing payday loan industry describe them as "immoral and unjust" and "legal loan sharks".

There is an equally big gulf between the way it portrays its average customer ("young professionals who are web-savvy, fully-banked, have access to mainstream credit and a regular income"), 95% of whom, according to its customer surveys, feel "satisfied" with the service, and the characterisation offered by debt counsellors and MPs, who are seeing increasing numbers of customers winding up in financial trouble as a result of taking out payday loans. Citizens Advice reports a fourfold increase over two years in the number of people with payday-loan-related problems.

Last week, the Office of Fair Trading launched a review of the payday lending sector, looking at all the companies offering these short-term unsecured loans, which are usually repaid on the customer's next payday, in response to concerns that "some payday lenders are taking advantage of people in financial difficulty" and not meeting "guidance on irresponsible lending". The OFT said it aimed to drive out companies that are not fit to hold consumer credit licences.

Wonga does not expect to be one of the companies driven out of the market, and the company's advertising strategy tries to set Wonga aside from the myriad of evocatively named rival online companies that offer money if you Google payday loans: Kwikcash, Loans for Women, QuickQuid, Toothfairy, Payday UK, Payday Express, GetCashToday.co.uk and Peachy (which has a "representative" APR of 16,381%).

Controversial services



"Part of our job is to get people to understand that Wonga are the good guys," Darryl Bowman, the company's head of marketing, says, explaining why the company is investing "substantial amounts of money" on advertising.

It's not difficult to find people who have had bad experiences with Wonga.com, and when I explain that I've spoken at length to several very unhappy customers, the company's PR manager is sanguine, remarks that debt is an emotional subject, and says the company accepts that its services will be controversial.

But he suggests it would be a good idea if, for balance, I talk to some people who have used the service and have positive things to say. He emails over four names and numbers of customers who he's plucked from the website's feedback forum and who are willing to talk.

Unexpectedly, of the two who return my calls, neither turn out to be the web-savvy young professionals that the company believes it's catering to. Instead, both closely fit the image of vulnerable customers in real financial difficulty that the campaign groups are trying to protect.

One is a 47-year-old nurse, who was forced to borrow money when he had to go down to half pay because he was recovering from a work injury, and he had no other source of credit.

The other, Susan, is 53, unemployed and dependent on disability benefits. She finds that with the cost of living rising, her benefits sometimes don't stretch to the end of the month, and has taken out loans with Wonga to buy food, if she's caught short. She's a bit vague, but thinks she's taken out half a dozen loans with Wonga over the past few months.

"I think they're brilliant. I pat them on the back," she says. She has had problems with credit cards before, and doesn't have an overdraft, but Wonga gave her credit very swiftly.

Wonga's website talks in a typically breezy way of people having "Wonga moments", as if taking out the loan is a happy lifestyle choice. Perhaps, it suggests "you've just remembered your wedding anniversary with hours to spare … Don't worry, Wonga it!"

There's no mention of unwell, unemployed people borrowing money for food because the value of their benefits payments has depreciated as the cost of living rises.

Susan gets around £600 a month in benefits, and recently when she was struggling to pay back a large, overdue bill, she took out £400 with Wonga. She can't remember the term, but if she'd kept it for a month, Wonga would have charged her £130 for the service (£61 for a fortnight) – a huge extra chunk out of the £600 she has to live on. "You are going to have to pay a higher level of interest when it's quick money," she says, happy to accept the cost because no one else will lend to her. Anyone with a reasonable credit rating, and regular income, could get that money for a month for free on a credit card or interest-free overdraft.

It's an unfortunate choice of customer to have put forward. Part of Wonga's reputation rests on only lending to people in steady employment. "Sometimes we will make loans to people on significant benefits, but it is not something we do very frequently. It is very infrequent. I'm not going to say it doesn't happen," John Morwood, the company spokesman, says.

24/7 loans



The boom in the payday loan industry has come at a time when traditional forms of credit have become harder to access, and when the downturn has shrunk incomes. In the past few years, technological advances have made it possible for a growing range of lenders to supply money 24/7 to customers quickly, without any need for human contact – no phone calls, no demands for utility bills or proof of address; some organisations allow customers to make a request simply by texting over the amount they want and the number of days they want it for.

Because there's no need to talk to anyone or to explain what you want the money for, or why you're short of cash, much stigma and embarrassment has been removed from the exchange, and the service is becoming increasingly popular, despite the very high interest rates.

Wonga's staff are keen to position its service as more akin to bank overdrafts, than to rival payday lenders. "We believe that we are in sector on our own," Bowman says, in a basement boardroom at the company's headquarters in a grand house on the edge of Regent's Park in central London, its white stucco gleaming in the spring sunshine. Among a number of awards on display is one naming Wonga.com as last year's fastest-growing digital media company in Europe. "We see ourselves as an internet technology business first, and a finance business second," Bowman says.

Staff say 1 million people visit the site and "hundreds of thousands" of loans are made each month. The company's turnover trebled between 2009 and 2010, to £73m turnover, and Errol Damelin, the co-founder and chief executive of Wonga, is reported to have taken home £1.6m last year.

The company refuses two-thirds of all applications because it doesn't think the applicant will be able to pay back the loan. "The reason why we decline them is that we are a responsible lender and we make money when people pay us back. We want people to pay us back. Our model is not built around people not paying us back. Our objective and our need to be responsible are perfectly aligned," Bowman says.

The company says it does not do aggressive marketing and discourages people from rolling over their loans. The phrase "responsible lending" trips off Bowman's tongue repeatedly. "When people come to our website they have all the information presented to them in a very transparent, upfront way, and they are able to make a sensible decision about whether this product is right for them. We charge 1% interest per day, which is £1 per £100 borrowed. With us we tell you exactly what you're getting into, there is no small print, no surprises."

When asked if Wonga preys on the vulnerable, Bowman says: "If I was a Wonga customer, I would be insulted by that."

We only really get towards an answer in a roundabout way, when he says he opposes the idea of fixing a cap on the amount of interest companies can charge, because it would risk putting "responsible, regulated" organisations like his out of business, leaving the market open to illegal lenders. "What we don't want is for people to have to go to non-regulated lenders … illegal other options," he says. Here, for the first time is half an admission that this is a service for people who have nowhere else to go.

Asked if there's an uncomfortable dissonance between the breeziness of the brand and the desperation felt by their clients who accept their high interest rates because they have limited alternatives, Bowman laughs. "Maybe I've been brainwashed, but I just don't see it like that."

Staff appear frustrated by what they see as the paternalistic concerns of debt campaigners, and argue that their customers "aren't stupid", and are quite able to understand the interest rates they're signing up to.

Stella Creasy, MP for Walthamstow, north-east London, who has mounted a robust campaign against the payday lending industry, says she believes, on the basis of conversations with Wonga's management, that it is trying to be responsible, in good faith, but somehow hasn't understood the fundamental nature of the market it is dealing with.

"The mistake they are making is to assume that people, when faced with a financial penalty, have the option to avoid it. In their mind they have the option of choosing not to extend a loan, when they see the costs. What they don't understand is that they are dealing with a clientele who doesn't have that choice." she says.

She dismisses the argument that Wonga's success comes from its frontier-breaking technology. "They need to think again about the idea that it is the technology that people are attracted to, rather than the credit. It is not about a future form of finance. The technology should not blind you to the rates these people are charged and the impact that has on people's financial stability. Once they've paid back the loan and interest and charges, their money runs out even quicker," she says.

The company has already attracted formal censure over its cheerfully casual approach to taking on debt; in January it was forced to remove a page from its website that suggested its loans had advantages over student loans (neglecting to mention its APR of 4,214% and the current student loan rate of 1.5%), and inviting students to borrow money from them for things such as holiday flights to the Canaries. The proposal was condemned variously as "cynical", "predatory" and "irresponsible". The Advertising Standards Authority took an earlier, equally jaunty ad off the air, ruling that the "light-hearted presentation of the ad was likely to mislead about the nature and implications of the product". Transport for London was criticised for a sponsorship deal it agreed with Wonga.

"The reasons Wonga exists are not funny reasons. People don't go to Wonga happy and cheerful. When you haven't got any money you haven't got any choice," a 29-year-old man, who works in recruitment, says. He asked not to be named, worried his parents might find out that he owes around £2,000 to half a dozen different online lenders, and is borrowing more each month to pay off the interest.

The company offices are filled with around 60 mostly young employees, dressed down in internet startup style. There's a personal trainer, employed to take staff running in the park for twice-weekly fitness sessions. A senior team dealing with people who can't pay back their loans are in another basement room ("Don't ask me why Moira has got a Barbie on her desk") but there are a further 100 people in a callcentre in South Africa, charged with ringing people to urge them to repay their loans.Staff say this is a fun place to work. Damelin's office has a starkly minimalist white office, with white leather sofas, without any papers (everything is digital) or really anything except a bottle of Evian, a bottle of Carex hand sanitising gel, and a huge print of Che Guevara.

These offices feel very far removed from the homes of the clients who are taking the loans.

Customers' stories



Four customers who gave detailed accounts of the severe difficulties that taking out a Wonga loan had caused them, all said they had turned to Wonga because they had no other way to get credit.

Yomi, 55, a council worker, saw his salary drop two years ago (after 23 years in the sector) from £46,000 to £28,000, when he switched from temping to a more secure post, anxious to ensure he had steady work at a time of rising redundancies. He took out a Wonga loan in October 2010, when the eldest of his six children began university and needed £900 to pay for his accommodation. Although his wife is also working, both have long, expensive commutes, and there was little left from his £1,700 monthly take-home pay after the £650 rent and £600 petrol had been paid. He had defaulted on his mortgage a few years earlier, and is unable to get a credit card or an overdraft from his bank. He went to Lloyds, Barclays, Nationwide and none of them were able to lend him the money he needed, so he tried Wonga.

"I started seeing these advertisements on television, for Wonga, on the buses. The idea that you could get a loan within minutes. The temptation was there to see what they could do for me. I wasn't looking too much at the small print," he says, talking in a side room in his office during a lunch hour, out of earshot of colleagues, who he thinks would be amazed to know about his payday loan problems. "I was surprised they didn't refuse me. The way I saw it at the time, I thought I am in financial turmoil and they are able to help me."

If you borrow £400 for 35 days, you accrue £145.48 in interest and fees, and £545.48 is taken out of your account automatically the next month. But Yomi was already having problems making ends meet before he took the loan, and there was no chance of his salary increasing the next month. So he had to take out a second loan to make ends meet until payday.

"When they take the money out of the account, that reduces your disposable income for the month; halfway through the month I had no money so I took out another loan with Wonga. Once you start it, you don't stop. Unless something happens, you have to go back to bridge the gap," he says.

Occasionally he would go to other online payday lenders to get new money to pay off Wonga and over the course of a year he deferred paying the Wonga loan back on several occasions. In the end he told Wonga he couldn't pay back, and they have entered into a debt repayment plan with him, freezing his interest. He calculates he has paid back around £1,500 in interest to a variety of different online and mobile phone lenders, because of his initial decision to take out the £400 loan.

The experience has been a profoundly unhappy one. "I worry about it all the time. Especially when we come to payday. I have sleepless nights. It made me start drinking for a stage until I realised that drinking was costing me more money. I haven't told my son. I'm trying not to push my anger on to my kids. I go into my shell, into my room," he says.

He is unsure about what he feels about Wonga, and blames himself as much as them; he's grateful they helped him pay his son's accommodation fees. "They are providing a service, you should give credit to them, but it is exploitative," he says.

When he sees the logo on buses and football shirts he thinks: "Yes, they are doing that because they are getting so much money from me." He recommends that people needing short-term cash should find a local credit union, such as the Waltham Forest Community Credit Union, which helped him out.

On the morning I meet him, an email has popped into his inbox, with the subject: "Yomi, does payday seem a long way off?" There's a picture of Wonga's three pensioner puppets, and a Wonga promo code offering him a £5.50 discount on fees if he takes out a new loan.

"Obviously that's not ideal," Bowman, Wonga's head of marketing, says when I show him a printout of the email. He says he can't comment on individual cases, but admits that it is never going to be possible to get all lending decisions right and he adds that the promotional email hasn't actually come from the Wonga, but has been sent out by an affiliate.

On the broader question of whether it's right to lend to people who have defaulted on their mortgages and have such a bad credit rating, he says the company's 7% arrears rate is "market-leading".

These cases represent lending that hasn't gone right. Working on a 7% arrears rate, around 245,000 of the total loans made by Wonga so far have resulted in the kinds of situations described by customers here. Bowman says: "Hands up, sometimes people slip through a net which we're constantly trying to tighten. In the vast majority of cases we do get it right."

Unlike some rival organisations, Wonga doesn't use bailiffs to force people to pay money, and has developed a "hardship team" to deal with clients who are unable to pay, but some clients have had difficulties persuading Wonga to stop taking payments out of their account.

Anthony Morgan, 33, a hospital cleaner, contacted Wonga last summer when he found himself unable to pay back around £560, a sum that had ballooned from a smaller loan taken out to buy presents for his three children. Staff explained said they would begin a debt repayment scheme, allowing him to pay back gradually, but the next day he found £800 had been wrongly taken from his account, leaving him with no money for the rest of month.

The company has subsequently wiped the debts, but Morgan remains angry at the experience. "They don't care that you are left with no money as long as they get theirs; that's the way [it] came across to me," he says. "They are a rip-off."

The company argues that these cases of people forced to come to Wonga because they have no option are unrepresentative and state that its internal research suggests that that 70% of people who use the product do have access to other forms of credit. It argues that people come to Wonga because they are happy to pay a premium for the "speed and convenience offered by an online service".

Why take the bus?



Asked why anyone would take out a loan like this if they had any other choice, Morwood, Wonga's head of PR, replies patiently: "It's a bit like me saying why would you take a black cab, when you can take a tube or a bus for the 10th of the price? It's not about price ... There are times when jumping in a black cab and paying whatever the difference in price is worth it. It's not something you do every day." It's an awkward analogy because it seems to be missing the point that a great number of their customers are jumping into the taxi on the never-never, because they cannot afford the upfront cost of taking a bus.

John (not his real name), a 29-year-old who works in recruitment and earns £17,300, is probably more the kind of customer that Wonga thinks is typical. He borrowed money from them on several occasions to go out with his friends, most of whom earn more than him. Because of a previous bad debt, he has no overdraft or credit card.

"I couldn't get money any other way. I didn't want to borrow £80 off my parents just to go out and drink beer with my mates," he says. He saw Wonga advertised on television and laughed when he saw the APR, but he liked it when he tried it. "It didn't feel expensive. I know it is expensive, but when no one else it able to help you out, you have no leeway. If a company is able to lend you that money and they take £25 or £39 off you for it then that is absolutely superb," he says. He began taking out loans on his iPhone, as he walked into town to meet friends; the money would be in his account before he reached the cash machine.

"I would say I am bored this weekend, I have no money. I will take out £100, and see my friends and worry about paying on payday," he says. His Wonga limit quickly built up, allowing him to borrow more and more, to a total of £1,000. "It is hard to explain, thinking about it. I am not sure how it went from a few loans to a lot. It is weird. They are so easy to take out. When you are doing it, you don't realise the impact. You think, my friends are going out, I could go out too, and a few taps on the laptop ... I would go to Wonga, max that out and then get £750 from another one. "

He liked the way there was no need to talk to anyone, no paper bills that his parents might see. "Because it's done online, there's no human interaction, it is a lot less difficult ... it means that I can hide it. The online is a huge aspect of it. I wouldn't want to talk to somebody about it. The web doesn't ask questions. The website wouldn't judge me.

"I first noticed that I was getting into trouble when I had to get another payday loan to survive to the end of the month, rather than it being a bit of extra cash in my pocket. At the moment I am in dire straits. Since I have taken out one to help me survive the month, I haven't cleared them off. I've always had one or two a month rolling over."

When we talk he has no idea how much he owes. "I'd like to be able to say this much, but I honestly don't know. I could guestimate, £1,800-£1,900. I am under no illusion that I am the victim. I know I'm not a victim. I'm know I'm the idiot in the scenario." He no longer goes out with his friends, as he can't afford it.

"By the middle of the month, just before I go to sleep I will have a worry about it. By payday it is all I think about. It is all consuming. People notice that I get grumpy and miserable. It affects all of my life."

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