POLITICIANS in the borough have slammed London mayor Boris Johnson for taking money from a so-called "legal loan shark" to pay for free travel in the capital on New Year's Eve.

It comes after Transport for London (TfL) confirmed that online short term loans firm Wonga.com will fund all bus and train services between 11.45pm on December 31 and 4.30am on January 1.

Walthamstow MP Stella Creasy, who recently tabled a bill in Parliament demanding tighter regulation of loan companies, said she was outraged by the move, while Waltham Forest's London Assembly representative Jennette Arnold said it was “disgraceful”.

But the CEO and founder of Wonga.com, Errol Damelin, has hit back at the claims and insists his company is a responsible lender.

Ms Creasy said: "I've tabled legislation to try to deal with the worst excesses of these companies and protect the poorest consumers in the capital but Wonga have written to me opposing these proposals.

“The average level of debt amongst Londoners is rising, with many now facing unemployment in the new year as well as struggling to make ends meet given the high cost of living here.

“Do these companies care? Obviously not as they charge interest rates of up to 2,600 per cent on loans, encouraging customers to keep borrowing from them so they get more and more into debt.”

She added: “I hope the Mayor will change his mind on taking their cash and profiting from these kinds of exorbitant fees until Wonga change their stance on this”.

Ms Arnold wrote on social networking website Twitter: “People in desperate need subsidising free New Year's travel in London - not surprised Mayor's office is staying quiet.

“It's a total disgrace.”

But Mr Damelin said: “Wonga is totally transparent about how we operate and how we charge for the short-term loans we provide.

"Our customers know exactly what they can expect to pay and they appreciate that clarity, which is reflected in our excellent customer satisfaction scores."

He also said that measuring his company's charges using annual percentage rates (APR) was a "distortion" because Wonga only provides short-term loans of a maximum of 30 days.

The Guardian is awaiting a comment from the Mayor of London's office.

Meanwhile Ms Creasy's Consumer Credit Bill is due to be discussed in the Commons early next year.

She is also due to meet with ministers to seek their support.

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