Newcastle United's £24m four-year sponsorship deal with Wonga, the high interest, short-term "payday" loan company, has been greeted by a storm of protest from MPs, campaigners against debt and supporters.

Derek Llambias, the club's managing director, said the deal will provide money for the club's youth academy and community work, as well as to boost the first team. It emerged on Tuesday that the deal also includes naming rights for the club's stadium although Wonga will restore the Sports Direct Arena to its traditional name, St James' Park.

"We are building a club that can regularly compete for top honours at the highest level," Llambias said. "As everyone knows, a strong commercial programme is vital to this goal and I am delighted to welcome Wonga into the fold as our lead commercial partner."

The backlash began even before Newcastle confirmed they had signed the deal with Wonga, whose loans charge interest at an average annual percentage rate of 4,214%. Wonga says although that figure is accurate, it does not represent the reality of its loans, which are for a maximum 30 days at 1% interest a day, with compound interest not being charged as for the APR calculation.

However Stella Creasy, the Labour MP for Walthamstow, who has for two years led a campaign against Wonga, including its sponsorship of the Blackpool and Hearts football clubs, describes payday loan companies as "legal loan sharks". She wants the government to impose a legal cap on lending rates, at much lower than 4,214%, as happens in most other European countries.

In July the Football Supporters' Federation called on the football authorities to ban Wonga from advertising or sponsorship until such regulation of the industry comes into force. Nick Forbes, the leader of Newcastle city council, said he was "appalled and sickened" that Newcastle would "sign a deal with a legal loan shark".

Northumberland and Newcastle MPs including Ian Lavery, MP for Wansbeck, and Chi Onwurah, MP for Newcastle Central, also expressed outrage. "Some of the richest young men in Newcastle to wear shirts calling on the poorest to go to a legal loan shark," Onwurah tweeted.

Michael Martin, a lifelong Newcastle supporter and editor of the long-established True Faith fanzine, said the sponsorship was "shameful" and "I really don't understand what the club is about any more".

The Muslim Council of Britain hopes Newcastle respect the wishes of any Muslim players who ask to wear the shirt without the sponsor's name. Under Sharia law giving or receiving interest is forbidden.

Four Muslim players – Demba Ba, Papiss Cissé, Cheik Tioté and Hatem Ben Arfa – started against Manchester United on Sunday. "Assuming all four are on the pitch at the same time, if you have seven out of 11 [with the sponsor on their shirts] you have sufficient coverage," Shaykh Ibrahim Mogra, assistant secretary general of the MCB, told the Independent. "It is not asking too much, I believe."

• This article was amended on 10 October 2012. The original called Ian Lavery a "Newcastle MP". Lavery is MP for Wansbeck, Northumberland. This has been corrected.