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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:

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.”


Charity warns of payday loan risks « This Is Jersey

A debt advice charity has seen almost 16,500 people approach it this year with problems linked to payday loan debt – with more than 2,000 of them struggling with five of these loans or more.

The Consumer Credit Counselling Service (CCCS) said it is on course to see a record number of people this year, having assisted almost 17,500 clients last year and just under 6,500 in 2009.

Such loans are intended as a short-term stop gap to tide people over for a few weeks but the charity said that 173 people it has seen this year have 10 or more of them.

The typical amount owed on payday loans has increased by almost a quarter in the last three years to reach £1,458, which is roughly equal to the monthly average income for a CCCS client.

The charity fears that the figures could climb higher still as hikes in fuel bills and food costs push more households towards seeking out “crocodile help”.

Peter Tutton, the advice service’s head of policy, said: “We would expect payday lenders to tell people there are better options rather than feeding into that and offering crocodile help. We need payday lenders to get on top of responsible lending.”

Short-term lenders announced improved codes of practice in July which included commitments to stepping up transparency and carrying out affordability assessments to make sure people can pay back loans.

The charter was agreed by four trade associations representing more than 90% of the payday and short-term loan industry and members must abide by the code or ultimately face expulsion.

But consumer groups said the code was largely a rebrand of rules that have already been flouted and stricter action should follow if big improvements are not seen.

Firms have come under fire for giving people loans which turn out to be unaffordable, rolling over loans and charging annual interest rates running to several thousand per cent.