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Wonga Ad Banned From TV For Not Showing Cost Of Borrowing

An ad for payday lender Wonga has been banned for breaching regulations by failing to disclose the relevant cost of borrowing. The television ad showed a man anxiously jotting down figures on a napkin before looking at his phone calculator and seeing the amount of £153.79.

An elderly lady than said: “You appear to be in a financial quandary, young fellow. At Wonga you choose exactly how much to borrow and for how long,” and then adding: “You can even pay back early and save money.”

The Citizens Advice Bureau complained that the ad breached regulations by omitting the representative annual percentage rate (RAPR), as it understood that the claim “you can even pay back early and save money” was an incentive likely to trigger the requirement to disclose it.

Wonga accepted that an incentive to apply for credit was a trigger for disclosure of RAPR, but believed the phrase “you can even pay back early and save money” did not fit the criteria. It said the ability to repay a loan before it was due was a standard feature of many products, and that describing that feature in a way that it regarded as brief and factual did not amount to an incentive for the purposes of regulations.

But the Advertising Standards Authority (ASA) noted that the ad said consumers could “save money” with a Wonga loan because they would pay less if they repaid early.

The ASA said: “We acknowledged Wonga’s assertion that this was a factual statement of a feature of their service, but considered that the inclusion of the phrase ‘save money’ was surplus to a purely descriptive statement and offered a discount relative to the headline cost of borrowing a sum for the loan period originally requested.

“We considered that this was an incentive to apply for credit, and that the RAPR should therefore have been disclosed.” It ruled that the ad must not appear again in its current form, adding: “We told Wonga to ensure that future ads that included a comparison or incentive displayed the RAPR.”

Last week Wonga announced it had written off £220 million of debt belonging to 330,000 customers after admitting making loans to people who could not afford to repay them.

Citizens Advice said the ad was one of five payday loan adverts that had been banned after the charity reported them to the ASA. Others were from Peachy, Loan Monarch, Spends4u and Pounds To Pocket – all banned in July.

Citizens Advice chief executive Gillian Guy said: “Payday loan adverts that break the rules should be taken off the air. Adverts must be clear about what taking out a loan means and how much it will cost. The consequences are really serious when payday lending goes wrong. High interest rates and fees can mean that a small loan balloons into a huge debt.

“The ASA is right to take these steps to ban ads that are not up to scratch. With five out of the seven adverts we reported to the ASA now banned, both the advertising and payday loan industries need to look at why so many adverts are not meeting the grade and change their ways. Anyone concerned about the content of a payday advert can report it to Citizens Advice or the ASA directly.”

[…]

'Backing' for payday loan advert ban

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15 September 2014 Last updated at 15:33

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Delicious Digg Facebook reddit StumbleUpon Email Print By Hannah Richardson BBC News education reporter Payday lending has grown considerably in recent years

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MPs call for payday loan advert ban Q&A: Payday loans Monthly loan interest calculator

Three-quarters of British parents want payday loan firms to be banned from advertising to children on TV and radio, research suggests.

A Children’s Society survey of 1,065 parents suggests overwhelming support for a ban on adverts for these short-term high-interest cash advances.

A smaller survey of 680 teenagers found nine out of 10 recognised the names of payday loan firms.

Adverts are prohibited from encouraging under-18s to take out loans.

The charity’s campaign follows concern that interest rates of up to 6,000% a year on such loans can plunge families into problem debt.

‘Fun and tempting’

It also comes after a Commons Business Committee report warned adverts could expose children to the idea loans were “fun, easy and an appropriate way to access finance”.

The Children’s Society research reflects this, with a third of the young people surveyed saying they found payday loan adverts to be “fun, tempting or exciting”.

The charity wants to see restrictions on loan advertising like those already in place on adverts for gambling, alcohol, tobacco and junk food.

It is calling for the government to amend the Consumer Rights Bill to ban adverts before the 21:00 watershed.

Charity chief executive Matthew Reed said: “Through our front-line work we see first hand the devastating impact of debt on children’s lives.

Watershed

“We know it’s become a daily battle for families to pay the bills, meet the mortgage or rent payments, and find money for food or other basics. One setback or even a simple mistake can lead to a spiral of debt.

“Right now children are being exposed to a barrage of payday loan adverts, which put even more pressure on families struggling to make ends meet and to provide the very basics for their children.

“That’s why the law should be changed to ban these ads from TV and radio before the 9pm watershed.”

The Advertising Standards Authority is responsible for ensuring payday loan ads, wherever they appear, are socially responsible.

Its work compliments that of the Financial Conduct Authority, which is the lead regulator for financial advertising.

The ASA said: “This arrangement means that consumers are protected by a comprehensive set of rules covering all aspects of advertising for payday loans.

“We’ve acted robustly against payday loan advertisers found in breach the advertising rules, banning 24 ads since April 2013.”

But it pointed out that adverts – including those for payday loans – may contain elements that appeal to under-18s, such as colourful images or cartoons, without that meaning that the ad is “targeting” them, or otherwise causing them to engage with the product or service being advertised in a harmful way.

[…]

Millennials Choose Cash — And Why That's Not So Great

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Some two out of five Millennials—39%—prefer cash as the long-term investment for money they don’t need for at least 10 years, according to a new Bankrate.com report, roughly three times the number who chose the stock market. That’s a perilous pick, considering that cash will actually lose value over time due to inflation, while the S&P 500 has gained 17% in the last 12 months.

“What we are seeing is that Millennials actually get the importance of saving,” says Greg McBride, senior vice president and chief analyst at Bankrate. “They’re just not willing to take risks with it, particularly with regard to long-term savings.”

One thing that may explain the lean toward greenbacks is that Millennials came of age during tumultuous financial times. “When you look at the events of the last 10 to 15 years, with the financial crisis and the tech bust, young adults had a front row seat for one or both of those events,” McBride says. “Even if it didn’t impact them directly, they saw the impact it had on their parents and other family members and friends.”

Millenials prefer cash for long-term savings. (Photo credit: 401(K) 2013)

That’s certainly the case for Alisha Nicole Washington, 22, who recently graduated from Vanderbilt University and started work for an advertising firm in Atlanta. “I prefer to keep my savings in cash,” she says. “Growing up, it seemed like that was the forefront of every media outlet—how poorly the market was doing. The images and reports definitely left a lasting impression.”

Watching the stock market tank and their parents struggle has left many Millennials with a poor appetite for risk—which is ironic, since they’re the age group with the most ability to be risky. Since Millennials have decades to go until retirement, they have plenty of time to recover from market dips. “Even with something as severe as the financial crisis, if you just hung in there and continued contributing throughout, you not only recovered your losses, but you came out well ahead,” McBride says. “That’s not a perspective that someone who’s only been investing for a couple of years necessarily has.”

Among other things, student loan debt may be hampering Millennials’ ability to think long-term. The average student loan debt now tops $29,000 per student, according to the Project on Student Debt, and many are borrowing two and three times that amount. Jenna Kusmierek, 30, manages to fund her Roth IRA in full each year, but the rest of her cash goes to her student loans. “I plan to proceed this way for the next 10 years until my $140,000 student loan bill is paid off,” says Kusmierek, who lives in Denver.

Then there’s convenience. For Jason Fisher, the 27-year-old co-founder of Waterway Financial Group in Myrtle Beach, SC, having quick access to his funds trumps saving money in a retirement account. “The reduced accessibility to cash is not attractive,” says Fisher. “Often, an investment for our age group tends to be much shorter term anyway. I think children, first homes, and other bigger purchases make having cash on hand more feasible.”

Unfortunately, Millennials are the generation that most needs to get aggressive with savings. “Today’s young adults have the biggest retirement savings burden of all time,” McBride says. “Their life expectancies are longer, their healthcare costs are going to be higher, they don’t have the pensions their parents did, and the future of Social Security is more uncertain than it’s been for any of their predecessors.”

In other words, Millennials need a bigger nest egg, and they’re not going to get there with cash in a savings account. “A key part of this is getting people to think long term, getting them to see the power of compounding over those longer periods of time,” McBride says.

Thankfully, not all Millennials are sticking to cash-only savings. “I keep a small emergency fund in cash, but beyond that, I invest everything I can,” says Kali Hawlk, 24, who runs the blog Common Sense Millennial. “The only way I’m going to grow the value of my nest egg is to invest it where it can earn reasonable returns.”

Of course, cash—in an interest-earning savings account—is the best way to save for emergencies and shorter-term needs. But for the long haul, the stock market is the better bet.

Move up http://i.forbesimg.com tMove down 3 Reasons You Need Millennials On Your Team Erika Andersen Contributor The Price Of Doing Business With Generation Y LBS Business Strategy Review Contributor Millenials Must Stop Advertising Their Insecurity And Incompetence Maura Pennington Contributor SAP?Voice: A Multitude Of Myths About Millennials Jonathan Becher SAP […]

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Bills seek to cap payday loan rates in Louisiana – New Orleans City …

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Middlemen 'pose as payday lenders to siphon off extra fees'

One fifth of consumers who complained to Citizens Advice had had their card details passed on to other brokers without their knowledge. Some people had not even completed the application process but still found their cards being charged.

Fees are refundable if a loan is not taken out – but Citizens Advice’s analysis of 228 cases where a customer attempted to get a refund found that 28pc were refused, 14pc were promised a refund which never appeared and 42pc struggled even to get in touch with the broker.

In one case seen by the charity, a young woman sought help after she applied for a payday loan and was bombarded with texts from other payday loan firms “within seconds”.

She contacted two or three of them but decided not to take out a loan. Over the next few days she found that several sums had been drained out of her bank account from different brokers, despite the fact that no loan had been given.

The payday lending industry is facing a clampdown. Tough new regulator the Financial Conduct Authority (FCA) recently announced plans to crack down on the sector, including limiting the number of times payday lenders are allowed to roll over loans to twice, forcing them to put “risk warnings” on their advertising and limiting the number of attempts lenders can make to claw back money if there is insufficient cash in a borrower’s bank account to two.

The FCA is also considering the fees charged by payday firms to borrowers who default as part of plans for a cap on the total cost of credit. The Competition Commission will produce a report into the payday industry later this year.

Citizens Advice wants the FCA, which takes over regulation of consumer credit in April, to take an equally tough stance with credit brokers.

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[…]

Credit brokers 'prey on borrowers'

Credit brokers are preying on cash-strapped borrowers by “posing” as payday lenders and charging unexpected fees for organising loans, according to evidence compiled by Citizens Advice.

The debt advice charity said consumers are being charged set-up costs of £70 on top of the expense of taking out a payday loan – and in some cases brokers are siphoning cash away from people’s bank accounts without their clear permission.

Citizens Advice warned that borrowers using a broker often believe they are dealing directly with a payday loan company because websites and texts from some brokers do not make this clear. Borrowers are then hit with an unexpected fee for arranging the loan.

The charity analysed 490 complaints reported to it about credit brokers between June and July 2013.

Two-fifths of cases involved the up-front fees charged by these “middlemen” firms. Of these, 58% of cases involved people being hit with unexpected fees and the remaining 42% involved “deceptive practices” – including people being charged a much higher fee than agreed, fees being imposed for services they never signed up to and firms pretending to be the lender at the other end of the chain instead of the go-between.

One fifth of consumers who complained to Citizens Advice had their card details passed on to other brokers without their knowledge. Some people had not even completed the application process but still found their cards being charged.

Fees are refundable if a loan is not taken out – but Citizens Advice analysis of 228 cases where a customer attempted to get a refund found that 28% were refused, 14% were promised a refund which never appeared and 42% struggled to even get in touch with the broker.

Citizens Advice estimates 3,000 problems with credit brokers were reported to it over the last year. But the consumer body believes many more people who are having problems do not even realise they are dealing with a broker.

In one case seen by the charity, a young woman sought help after she applied for a payday loan and was bombarded with texts from other payday loan firms “within seconds”.

She contacted two or three of them but decided not to take out a loan. Over the next few days she found that several sums had been drained out of her bank account from different brokers, despite the fact that no loan had been given.

The payday lending industry is facing a clampdown. Tough new regulator the Financial Conduct Authority (FCA) recently announced plans to crack down on the sector, including limiting the number of times payday lenders are allowed to roll over loans to twice, forcing them to put “risk warnings” on their advertising and limiting the number of attempts lenders can make to claw back money if there is insufficient cash in a borrower’s bank account to two.

The FCA is also considering the fees charged by payday firms to borrowers who default as part of plans for a cap on the total cost of credit. The Competition Commission will produce a report into the payday industry later this year.

Citizens Advice wants the FCA, which takes over regulation of consumer credit in April, to take an equally tough stance with credit brokers.

Citizens Advice chief executive Gillian Guy said: “Credit brokers should not be making people’s money problems worse by charging unexpected fees.

“In some cases, brokers are preying on people’s need for short-term credit and adding to the pain of poor payday lending by posing as a direct lender.”

Urging brokers to be more transparent, she continued: “The FCA needs to recognise the harm menaces in this industry can cause and come down hard on those who break the rules.

“Preventing unscrupulous brokers from entering the market in the first place, through a strict authorisation process, is essential.

“The FCA should also be seriously concerned about the prevalence of data sharing among brokers as money is being siphoned from people’s bank account without clear permission.”

[…]

MPs urge crackdown on payday lender advertising | Money | The …

Image Payday-009.jpg

MPs say payday lenders should be banned from advertising during children’s television programmes. Photograph: theguardian.com

Payday lenders should be banned from advertising during children‘s TV programmes and forced to provide real-time data about people who have taken out loans, a committee of MPs has said.

A report by the business, innovation and skills committee recommended tough action on marketing by firms offering short-term, high-cost loans, after hearing evidence that children were being “groomed” to accept such borrowing as normal.

A recent report by Ofcom suggested that the average child aged between four and 15 was exposed to 70 payday loan adverts last year. The committee’s chair, Adrian Bailey MP, said: “It is worrying that our children are being exposed to such an extent to adverts that can present payday loans as a fun, easy and appropriate way to access finance. Children’s programmes are simply not an acceptable place for payday loan adverts.”

The committee also recommended tackling nuisance emails and texts offering expensive loans to people who are “at their lowest ebb”, forcing lenders to contribute towards funding debt advice, and changing the way they do business.

In July 2014, payday lenders will face new rules from the Financial Conduct Authority on the number of times they roll over a loan and dip into a customer’s bank account to try to retrieve repayments.

The FCA has said it will limit roll-overs to two, and that lenders can make two failed attempts at taking cash through continuous payment authorities (CPAs) before they have to give up. It has also been charged by the government with setting a cap on the total cost of borrowing, to be introduced in early 2015.

However, the committee said the regulator needed to be tougher on lenders and, allow just one rollover, and insist that consumers be given three days’ notice of any attempt to collect repayments.

It said sharing data between lenders was vital to ensure robust affordability checks and stop customers applying for multiple loans, and called on the FCA to set a deadline of July 2014 for this to be set up.

Bailey said: “Inadequate affordability checks, unacceptable targeting and inappropriate use of roll-overs all are symptoms of a payday loans sector in urgent need of overhaul. The rapid expansion of the payday loan sector has been accompanied by a significant increase in the number of people experiencing serious debt problems. The two are not unrelated. It is clear that consumers are increasingly at risk from payday loans.”

The debt charity StepChange, which gave evidence to the MPs, welcomed the report. Its head of policy, Peter Tutton, said: “While payday lenders have poured resources into attracting new clients, they have demonstrably failed to address the problems of widespread irresponsible lending and rollovers, problems which all too often pitch people into serious financial hardship.

“Ensuring that firms share data in real time will help to prevent multiple payday loan use and the spiral of debt that can result. While a limit of one rollover will help to protect consumers from rapidly inflating debts.”

Wonga, the best-known lender in the sector, said: “The idea that Wonga advertises on children’s TV channels or programmes is a myth. We have a strict, long-standing policy not to advertise in this way.”

[…]

Pay day loans company fined £175,000 over millions of spam texts …


News release: 17 December 2013

The Information Commissioner’s Office (ICO) has served the pay day loans company, First Financial, with a £175,000 penalty after an investigation discovered that the company was responsible for sending millions of unlawful spam texts.

The Privacy and Electronic Communications Regulations (PECR), which govern electronic marketing, require organisations to have an individual’s consent before sending marketing messages by text. The penalty comes after 4,031 complaints were made against messages sent from numbers which the ICO found to belong to First Financial.

The messages included some claiming to be from the recipient’s friends, reading:

That prompted separate regulatory action from the Advertising Standards Authority.

ICO Director of Operations, Simon Entwisle, said:

“People are fed up with this menace and they are not willing to be bombarded with nuisance calls and text messages at all times of the day trying to get them to sign up to high interest loans. The fact that this individual tried to distance himself from the unlawful activities of his company shows the kind of individuals we’re dealing with here.”

“We will continue to target these companies that continue to blight the daily lives of people across the UK. We are also currently speaking with the government to get the legal bar lowered, allowing us to take action at a much earlier stage.”

The spam texts were sent using un-registered SIM cards, which is a common method used to avoid detection. However the content of the message was similar on each occasion and referred recipients to a website belonging to firstpaydayloanuk.co.uk, which is a trading name used by First Financial.

The penalty comes after the company’s former sole director, Hamed Shabani, was prosecuted on 8 October 2013 after he failed to notify First Financial’s processing of personal information with the ICO. This is a legal requirement under the Data Protection Act. Mr Shabani was fined £1,180.66, despite trying to claim he had no affiliation with the company.

Anyone who receives an unsolicited text message should avoid replying and report the message using the survey available on the ICO website. Over 200,000 responses have been sent in since the survey was setup early last year and the information provided is being used to help identify those companies responsible. You can also report spam texts to your network operator by sending them to ‘7726’. The networks are working to block the worst offenders.

The ICO has also published detailed guidance for direct marketers explaining their legal requirements under the Data Protection Act and Privacy and Electronic Communications Regulations. The guidance covers the circumstances in which organisations are able to carry out marketing over the phone, by text, by email, by post or by fax.

ENDS

If you need more information, please contact the ICO press office on
0303 123 9070 or visit the website at: www.ico.org.uk.

Notes to Editors

1. The Information Commissioner’s Office upholds information rights in the public interest, promoting openness by public bodies and data privacy for individuals.

2. The ICO has specific responsibilities set out in the Data Protection Act 1998, the Freedom of Information Act 2000, Environmental Information Regulations 2004 and Privacy and Electronic Communications Regulations 2003.

3. The ICO is on Twitter, Facebook and LinkedIn. Read more in the ICO blog and e-newsletter. Our Press Office page provides more information for journalists.

4. Anyone who processes personal information must comply with eight principles of the Data Protection Act, which make sure that personal information is:

Fairly and lawfully processed Processed for limited purposes Adequate, relevant and not excessive Accurate and up to date Not kept for longer than is necessary Processed in line with your rights Secure Not transferred to other countries without adequate protection

5. Civil Monetary Penalties (CMPs) are subject to a right of appeal to the (First-tier Tribunal) General Regulatory Chamber against the imposition of the monetary penalty and/or the amount of the penalty specified in the monetary penalty notice.

6. Any monetary penalty is paid into the Treasury’s Consolidated Fund and is not kept by the Information Commissioner’s Office (ICO).

[…]

Payday loans company fined for mass spam texting – Credit Today

Payday loans company, First Financial, has been charged with a £175,000 penalty by the Information Commissioner’s Office (ICO) for sending millions of unlawful spam texts.

The investigation by the ICO was launched after 4,031 complaints were made against messages sent from numbers found belonging to First Financial.

In accordance with the Privacy and Electronic Communications Regulation (PECR), which governs electronic marketing, organisations are required to obtain an individual’s permission before sending marketing messages by text.

Some of the messages in question claimed to be from the recipient’s friends, reading: “Hi Mate hows u? I’m still out in town, just got £850 in my account from these guys www.firstpaydayloanuk.co.uk.”

Messages such as this resulted in separate regulatory actions from the Advertising Standards Authority.

Simon Entwisle, ICO director of operations, said: “People are fed up with this menace and they are not willing to be bombarded with nuisance calls and text messages at all times of the day trying to get them to sign up to high interest loans.”

The spam-texts were sent through un-registered SIM cards, commonly used to avoid detection.

Each message had similar content and referred the recipients to a website used by First Financial.

The penalty followed the prosecution of the company’s former sole director, Hamed Shabani, in October 2013 after he failed to notify the ICO of First Financial’s processing of personal information.

Despite trying to claim he had no affiliation with the company, Shabani was fined £1,180.66.

Entwisle added: “The fact that this individual tried to distance himself from the unlawful activities of his company shows the kind of individuals we’re dealing with here.

“We are currently speaking with the government to get the legal bar lowered, allowing us to take action at a much earlier stage.”

[…]