Martin Lewis, founder of Moneysavingexpert.com, told the Business, Innovation and Skills Select Committee on payday lenders today (5 November), the sector’s biggest players were subjecting children to “inappropriate propaganda” through adverts using cartoon characters to make the sector appear more appealing.
He pointed to research, commissioned by the business, revealing that one in three parents with children under 10-years old found they were already repeating the straplines of some brands. Additionally, around 15 per cent said their kids would urge them to borrow money from a lender when they were told they could not be bought something.
Lewis called for payday lenders to be banned from appearing on kids’ TV channels adding current campaigns made the sector appear “fun” rather than a “form of hardcore debt”
He said: “Where adverts are permitted they need to include a string of wealth warnings to ensure the fun is taken away.
“Payday lenders have huge advertising and film budgets, which in turn are used to bring in more customers and generate even more profit. There needs to legislation to disrupt this type of business model. The Financial Conduct Authority’s (FCA) proposals [on tougher advertising regulations for the industry] are a cup of water not an oasis and I think we need more to combat some of the smaller providers.”
The calls were echoed by consumer groups Citizens Advice, Which? and StepChange, who said the marketing from some lenders was “social irresponsible” and more was needed from the sector as a whole to improve best practice.
Gillian Guy, chief executive of Citizens Advice said: “There’s no clarity [in the adverts] of the consequences [of short-term loans]. It reminds me of cigarette advertising when it was portrayed as being sexy and people did not worry about the health warnings. Payday Loan companies need to do more to communicate the health warnings of their services.”
Despite the criticisms, representatives from Wonga, Mr Lender and QuickQuid told MPs at the same hearing they are doing “all they can” to market responsibly to consumers and dispel the “negative” image of the sector. Updates to online advertising strategies, and telemarketing guidelines as well as improving the clarity around how the speed of loans issued are promoted, have all been made since the Office of Fair Trading (OFT) published its report on the way the sector treats customers in March, they claim.
Members of the credit sector trade body the Consumer Finance Association are working with the Advertising Standards Authority (ASA) to improve their promotional strategies. The organisation’s members, which include Payday Express, QuickQuid and The Money Shop, are attending workshops hosted by the ad watchdog on what their adverts should look like and to develop guidelines on how short-term lenders should market to customers.
Lenders have come under intense scrutiny from the Competition Commission and the FCA in the wake of the OFT’s report. New regulations proposed by the FCA last month will force payday lenders to include a risk warning on advertisements urging customers to “think” before taking out a loan.