Wonga is no legal loan shark - and Newcastle is in the right to accept their cash

“Legal loan sharking” was the phrase used by the leader of Newcastle City council to describe Wonga, the short-loans company which has just signed a four year sponsorship deal with Newcastle United Football club. Local MPs have also piled into the club run by entrepreneur Mike Ashley for their greed in opening up to a loan company which charges an eye-watering 4214% a.p.r.

Now as someone who has written about Britain’s addiction to debt for well over a decade, you think I’d be lining up to pour scorn on Newcastle’s owners. But I’m not - in fact I think they have a perfect right to sign up Wonga and I’d go further and say there is also a place for payday lenders.

Let’s look at the supposedly money-grabbing immorality of Newcastle’s owners first. Newcastle is just the latest club to accept Wonga as a sponsor – when Blackpool was in the Premier League a couple of years back they had their shirt sponsored by Wonga and no one raised an objection then. So what’s so awful about Newcastle doing the same? Also there are a host of companies that sponsor team kits throughout the leagues that, if you delved into their accounts, what they invest in, or ownership structure your moral compass would probably go haywire.

What’s more, just because a shirt is sponsored doesn’t mean that we are more likely to borrow money from Wonga - we are sentient human beings after able to make our own decisions. We have to trust people to make their own decisions in life. And what really qualifies as exploitative in the world of finance? I’d argue that Northern Rock – a former sponsor of Newcastle United – has a lot more to answer for than Wonga. It was the Rock after all that signed thousands of borrowers up on 125% mortgage deals which has literally chained them to years of negative equity. In addition, the Rock bust itself by betting the farm on the wholesale money markets rather than acting like a responsible bank and growing through acquiring deposits. This helped precipitate the first British bank run in well over a century – isn’t that a little more damaging than lending someone £100 and asking for £120 back a week or two later?

Wonga of course with its high headline rate – and yes it is higher than many others in the payday industry – is nothing but a convenient Aunt Sally for political leaders to chuck their at opprobrium. This same political class stood by when we racked up one and half trillion pounds of debt – I don’t remember them saying how evil finance firms – some of whom sponsor team kit still – were while they were selling (or should that be mis-selling?) tens of thousands of interest only mortgages which many have little prospect of paying back.

It’s worth remembering too that Wonga and fellow payday lenders do actually meet a purpose. With banks only lending to ‘prime’ customers it’s hard for many – and very expensive - to actually get an overdraft or an extension on a credit card when they a struggling. A couple of hundred pounds to tide over to payday is actually a useful service to them. Of course, as I have written before, there needs to be tight regulation on these loans and authorities need to be careful about who they are marketed too – there was one ridiculous case of a lender pitching payday loans as a viable alternative to a student loan - but that applies to the whole financial services industry. Payday lenders are a new service, born of the credit crunch and the recession, and its emergence makes many uncomfortable but the useful thing would be to tackle why they exist – bank lending policy, personal finance education and poverty pay – rather than giving Newcastle United a hard time for acting like – shock horror – a business.