Payday loan firm Wonga has had a television advertisement banned after the advertising watchdog branded it "misleading".

The ad featured two puppets having a conversation about the cost of a Wonga loan, in which one of them implied that the representative interest rate of 5,853% was "irrelevant".

One of the puppets said: "Right, we're going to explain the costs of a Wonga short-term loan. Some people think they will pay thousands of per cent of interest. They won't of course – that's just the way annual rates are calculated. Say you borrowed £150 for 18 days, it would cost you £33.49."

The Advertising Standards Authority (ASA) received 31 complaints that the ad confused viewers about the interest rate applied to a Wonga loan and implied that the representative APR was irrelevant to a short-term loan. It was also deemed irresponsible because it encouraged consumers to disregard the representative APR and thereby trivialised the decision to take out a short-term loan.

"We considered that, though it attempted to clarify the costs associated with a Wonga loan, the ad created confusion as to the rates that would apply. On that basis, we concluded that the ad was misleading," the ASA said.

Wonga argued that the ad "contained only factual, accurate statements" and that if viewers decided the representative APR was not the best way to compare the cost of a loan, that fact "reflected poorly on the APR as a comparative tool for those circumstances". But the payday lender's arguments were dismissed by the watchdog and the company has been ordered not to run the ad again.

The ban is the latest in a string of troubles for the lender and the payday loans sector more widely. Last month the Financial Conduct Authority announced that it planned to kick off an in-depth review of the way high-cost short-term lenders collect debts and deal with people who have fallen into arrears.

More than a third of payday loans are repaid late or not at all, the equivalent of around 3.5m loans a year. Six in 10 complaints made about payday lenders are about how debts are collected.

Errol Damelin, the chairman of Wonga, is expected to announce he will stand down from his job in the next couple of months. He is reported to have grown weary of having to constantly defend the company from political attacks and public outcry.