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MoneySaving health warning…

MoneySaving health warning…

You get 20% off at your favourite shop. It's so easy, you feel like doing it again. Before you know it, you're hooked and every element of your financial life is being attacked to cut costs

It starts with something soft. You get 20% off at your favourite shop. It’s so easy, you feel like doing it again, this time perhaps a code-stack or a bit of extreme couponing. Before you know it, you’re hooked and every element of your financial life is being attacked to cut costs – mortgage, credit card, PPI reclaims and more.

I’m afraid recently we’ve had a couple of emails from victims of such a habit, and I felt it was only responsible to publish them to alert others of the potential problem…

Dear MoneySavingExpert,
I am a total convert having taken time to do a financial review. Thanks to your wonderful recommendations and codes, in the last two months I have:

I have also been inspired to change the way I use my money and am encouraging my family and friends to do the same. 

Thank you for the fantastic job you do.

Kind regards,
Gill Acham

And it’s not just women who can catch this bug, the very next day after Gill emailed, we got this – the contagion is spreading…

Hi MoneySavingExpert.com team,
 
Just a huge thank you to you and the team!

  • Today I’ve just ordered a £400 VAX carpet cleaner for £140! (see Vax deals)
  • Earlier this year I made a claim using one of your templates and I received £199.95 compensation from Lufthansa for a late evening flight, three years ago, which was cancelled due to a mechanical problem until the following day. At the time Lufthansa had already paid for the overnight hotel and evening meal (see Flight delay reclaiming)
  • I received payment for wrongly sold Identity Protection Insurance (see CPP reclaiming – though this is now closed)
  • I have changed my gas/electricity deal and saved a substantial sum annually (see Cheap energy club)
  • I have followed your advice re home buildings and contents insurance premiums and what used to be a fairly high four-figure sum (which I had been paying for year-on-year and remaining loyal to the company, the name of which I will not mention) is now down to less than £500 all-in and actually includes some better cover/clauses. (See Cheap home insurance)

Keep up the good work. I’m happy and some of my favourite charities are also happy as I have been able to donate a little more than I normally would have.

Kind regards,
Tony

YOU HAVE BEEN WARNED!

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The real reason why companies offer ‘a month’s free trial’

The real reason why companies offer ‘a month’s free trial’

The real reason why companies offer ‘a month’s free trial’

These days a very common method to build a customer base for service industries, whether it’s Netflix, credit monitoring services or even Graze food boxes, is the ‘month’s free subscription’.  

The obvious reason why companies do this is the apathy dividend – in other words, the hope that they’ll gain as people simply forget to cancel for a month or two. But this is a short-term contributor to profits as there’s actually a more powerful psychology at play here, which I suspect is a bigger win – let’s call it the ‘inertia dividend’.

We human beings are naturally pre-disposed to not liking to lose something that we have. Many people wouldn’t sign up for a movie service that they don’t really need if they had to pay for it, but would for a free month’s trial. They go in with a view to cancelling it when it ends, but at that point they become accustomed to it and now getting rid of it means a loss – and we don’t like loss.

The lust for such things doesn’t bounce back like elastic. We tend to feel the loss of a service far more potently than the joy at its gain in the first place.

An easy example is a salary rise (or cut in mortgage rate). At first you feel happy at the increased disposable income, yet soon that cash is normalised and we’re used to it. Take it away after we’ve adjusted to the new amount and the pain is high.

Just think of the number of people with gym memberships who don’t use them. The idea of losing the opportunity to go to the gym even though they rarely attend keeps them paying month after month. 

This is a dangerous sub-philosophy when it comes to MoneySaving. We have to be clinical and recognise our own biases. It’s important to try and revert your mindset back to where you were when you got it. Ask yourself: "If I didn’t have it, would I pay for it?" If the answer is no then be clinical and ditch it.

After all, if you’re paying for it by the month and you can cancel if you don’t use it, stop using it and then you can choose to sign up again.

I’d love to hear your experiences as to whether you feel you’re tough enough and hard enough to avoid this temptation or whether you’ve been caught by firms’ ‘inertia dividend’ and how much it has cost you.

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Morally bankrupt: Payday lender Smart-Pig’s student targeted ad hides its 1,089% APR – I’m reporting it to the FCA and the ASA


While I was getting the lift to the tube over the weekend, I spotted a payday lender advert on the wall. I always scan these things to see how they try and sell their costly wares, and to check out the APR, but this time I couldn’t see it. I looked at the small print. Nope it wasn’t there – nor was there any mention of cost whatsoever.

So as the lift was about to arrive, I took this snap on my phone…

The Smart-Pig advert I saw

The Smart-Pig advert I saw

I went through to Smart-Pig’s site, which states it’s a 1,089% representative APR (it’s worth noting that even then its slider doesn’t change the APR when you change the borrowing, it’s just a fixed amount).

This is a disgusting practice and shouldn’t be allowed. It is a high cost credit lender targeting the youngest people able to borrow in our society and deliberately ignoring cost. The ad focuses on ease and competitions.

This should be stopped, so I’m going to do my best to stop it (with the help of MSE Wendy and MSE Aileen – my campaigns team). We’re going to formally complain to both the Advertising Standards Authority (ASA) and the financial regulator, the Financial Conduct Authority (FCA). The aim is to get this advert stopped and hopefully to punish Smart-Pig too.

PS. If you see an ad you don’t approve of you can report it to the ASA and the FCA via these links. 

How the ad breaches FCA and ASA rules

Here’s where we believe the ad is wrong (all credit to MSE Aileen for doing the research on this).

We believe it breaches both the ASA’s CAP code and FCA rules and we are going to report it to both authorities on the basis that…

ARGUMENT 1

The advert says:

Win a term’s rent – every customer is entered into our competition to win a term’s rent up to £3500"

The CAP Code says:

Offers of financial products must be set out in a way that allows them to be understood easily by the audience being addressed. Marketers must ensure that they do not take advantage of consumers’ inexperience or credulity." (Section 14.1)

The FCA handbook says:

A financial promotion must include the representative APR if it includes an incentive (including but not limited to gifts, special offers, discounts and rewards) to apply for credit or to enter into an agreement under which credit is provided." (CONC 3.5.7 (1) (b))

This advert is taking advantage of students’ financial situation and is trying to entice them to take a loan with a competition. The lender is clearly using this competition as an incentive for students to apply for one of its loans, so the advert should therefore show the APR, which it doesn’t.

ARGUMENT 2

The advert says:

Trusted by over 20,000 students"

The CAP Code says:

Subjective claims must not mislead the consumer; marketing communications must not imply that expressions of opinion are objective claims." (Section 3.6)

The FCA handbook says:

A firm must ensure that a communication or a financial promotion is clear, fair, and not misleading." (CONC 3.3.1 (1))

And:

Examples of practices that are likely to contravene the clear, fair and not misleading rule include using false or unsubstantiated claims as to the firm’s size or experience or pre-eminence." (CONC 3.3.10 (5))

So what does "trusted" mean? Is this simply the number of students that have taken out one of these loans? If so, the lender should not draw the far-fetched conclusion that every customer trusts it. If there really is an element of trust, so if the lender conducted a survey, what were the results? Where is the source on this ad?

ARGUMENT 3

The advert says:

Manageable limits – borrow up to £350 until your next student loan. Pay back early, extend and even top up your loan."

The CAP Code says:

Marketing communications must not mislead the consumer by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner." (Section 3.3)

The FCA handbook says:

A financial promotion must include the representative APR if it includes an incentive (in the form of a statement about the speed or ease of processing, considering or granting an application, or of making funds available) to apply for credit or to enter into an agreement under which credit is provided." (CONC 3.5.7 (1) (c))

The lender is trying to persuade students to take out one of these loans because of the features mentioned in the last sentence. It is suggesting these features are unique to this lender, but in fact any consumer can do this, no matter what loan they take out.

And as the lender has failed to include the representative APR, we believe it’s breached two FCA rules – one where the competition is an incentive, and this incentive where it’s suggesting it’s easy to borrow more.

ARGUMENT 4

The advert says:

We know student money"  "Loans for students"

The CAP Code says:

Marketing communications must be prepared with a sense of responsibility to consumers and to society." (Section 1.3)

The FCA handbook says:

A firm must pay due regard to the interests of its customers and treat them fairly." (PRIN 2.1.1 (6))

The whole advert is aimed at students, persuading them to get further into debt. It’s socially irresponsible for the lender to be targeting students who are already managing so much debt.

The Smart-Pig website

The Smart-Pig website

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Is it age or a different generation that makes older people more trusting?

Is it age or a different generation that makes older people more trusting?

Is it age or a different generation that makes older people more trusting?

I was mulling today about my grandmother who is now in her early 90s. A few years ago, before her dementia sadly progressed so far as to make this issue redundant, she would constantly call me after a salesman had come to her door, asking me if she should switch to their product.

When I asked her why, the answer was always the same, "because the salesman told me it was cheaper". I always replied, "Grandma, you know what I do for a job, I promise I have made sure you are on the very cheapest possible tariff."

Yet, for her, the simple fact someone had told her it was cheaper meant they had to be telling the truth. She spoke of coming from a trusting world – my explaining this was just a commission-based seller using it as an opening line didn’t cut any mustard.

I hear similar tales repeated by many people about their parents as they delve further into old age. 

Now, of course there is no universality here. There are many extremely savvy people out there far older than my grandmother. Yet, it certainly does seem, anecdotally at least, that there is a trend of our older generation being more trusting.

What I am interested to know is, is this an age thing or a generational thing? 

Do we tend to become more trusting as we get older or is this about the ‘war generation’? This generation lived through a time when everyone in the country had to pull together and look after each other to enable them to survive, a better mannered time – is it because of this they have a greater belief that most people are honest and trustworthy? My suspicion is that it probably is. 

That’s not to say that younger generations aren’t trusting, but in a different way. In general I am a great believer that most people are good. 

If you ask somebody to do something for you they will generally do it well, even a stranger, without stealing your stuff or letting you down.  I’ve written before of my joy at seeing the person ahead of me in an ATM queue chase after the person in front of them as they’d walked away with their card but left the cash dangling.

However, when it comes to business and the corporate world I believe we live in an adversarial consumer society. A company’s job is to make money, our job is to stop them. Companies will tweak every possible profit-making nipple and at the sales end of it, if that includes manipulating the facts and using sales techniques to create openings, then they will.

I’d love your thoughts – are the older generation usually more trusting? And if so, why do you think that is… (and to know your age too would be interesting in this).

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Beware universities mis-selling courses on open days

Beware universities mis-selling courses on open days

Beware universities mis-selling courses on open days

It’s university application time. Hundreds of thousands of potential students across the country are deciding on their top pick institutions and courses. Many will have been on open days and been impressed by the facilities of the high powered institutions that could change their lives.

I’m a huge fan of university education – I think for many (though not all) it can broaden your financial, cultural, and general world outlook. Yet I want to sound a note of caution: how good a reflection of university life is the open day?

A few years ago I went with my little sister to an open day when she was choosing a course. It was a grand university and we got there for a talk on the international relations course. The man who walked in was an eminent professor who is often interviewed by world media – and within the sector, he is rather well-known.

He waxed regally about himself, the subject and the course for about 25 minutes. All looked good; I could see impressed young faces all around me (and some older ones too – many university applicants are mature students these days). 

Then it came to the question and answer session. One bright potential student put their hand up and asked: "How many contact hours do you have with undergraduates?" 

There was a pause, the professor hesitated, then said; "Actually, I don’t teach undergraduates, I only deal with research students." 

So the young questioner clarified; "In other words, we will never see you at all?"

"Correct," said the professor. 

That was it. If it hadn’t been for that bright student, no one would have realised that what they were being sold – the dream of getting (someone who considered himself to be) one of the world’s great minds on the subject – wasn’t a reality on this course. It got worse as people started to ask about practical issues such as whether or not it was possible to take a sandwich course and go to study abroad? The professor didn’t know. This continued, in fact he knew little about the practical details at all – no surprise as he didn’t have much involvement with them.

You could argue it was just ‘spin’, using one of their big names to draw people in, but there are many walks of life where we’d have called this mis-selling.  

I made a complaint to the university about this – and it agreed to look at its practices (which is why I’ve not named it). 

The appropriate halfway house would’ve been to couple him with another academic who was in charge of the course – so you had one to ‘sell’ the subject and the other to ‘sell’ the course.

These days, with the nominal cost of university at £9,000 per year per course (I say nominal because it is actually what you repay not what you’re charged that counts – see Student Loan Mythbuster), universities can’t allow themselves to behave in this old school paternalistic way.

We now have a much more consumer-driven university landscape and it’s important that universities understand that the way they portray themselves, like any other environment trying to attract business, needs to be ethical, clean, clear and above board.

Related Past Blogs:

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