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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

How much is a blank worth at Scrabble?

How much is a blank worth at Scrabble?

How much is a blank worth at Scrabble?

I’ve been getting the spreadsheet out. Over the weekend Mrs MSE and I played a few games (as we do). In the first two she was rather unlucky that I got both blanks each time, which I think probably turned the game in my favour (just). Thus intrigued, I decided to enter nerdvana and calculate the value of each blank.

Of course, a blank, in simple terms, is the only tile on a Scrabble board worth no points. Yet what I’m talking about is the value of gaining a blank – the fact it can be used as any letter makes it by far the most powerful, flexible and desirable tile there is.

So on to the calculation. Luckily, I’m not doing this blind. I’ve been keeping a spreadsheet of the last 948 of the 965 games of Scrabble Mrs MSE and I have played since we met – plus since game 690, I’ve been recording how many blanks we got in each game too. That means I now have just over 250 games with that data – a decent enough sample – so I decided to see how it pans out.

Me Mrs MSE
Games with 2 blanks 51 52
Average score 444.9 391.8
Games with 1 blanks 156 156
Average score 415.6 378.0
Games with 0 blanks 52 51
Average score 399.5 354.9

As you can see, the number of blanks has a clear impact on the score in a game.

This is, of course, for regular Scrabble players, who get a decent number of bingos (7-letter words). I suspect for new players, the difference will be far less as then the gain of being able to use a blank for bingos is offset by the fact it’s a non-scoring letter.

Typically for both of us it’s worth 23 points. Though there is a difference in the distribution. For me the second blank is worth far more – probably because I tend to play harder when I’m on for a very good score. For Mrs MSE the first blank is worth more, probably as she cares less about her ‘ongoing average’ than I do, so she takes her foot off the gas if she’s behind and likely to lose.

Related Past Blogs:

How would you describe Lidl? Is it really “poor food for poor people”?

How would you describe Lidl? Is it really “poor food for poor people”?

How would you describe Lidl? Is it really “poor food for poor people”?

The papers were full of it yesterday on the back of Lidl announcing sales of premium vintage and non-vintage wines such as Châteauneuf-du-Pape. All the messages were on about posh goods next to the usual tat. The phrase that came up time and time again was that "the firm is trying to move away from its poor food for poor people image".

I found this interesting, as I think it’s perhaps a legacy of a long-gone time. It’s not close to how I would characterise Lidl (or Aldi) and so I’m interested to find out if this is a true reflection of the general perception of Lidl, both among those who shop there and those who don’t.

Certainly a basket of shopping at Lidl can be very cheap. True too is the fact that it is used by many as a place to cheaply stock up on your bog roll and necessities – with a catch-up shop for the other stuff done at the main supermarkets. Yet for me this is less about quality of food and more about the range of choice.

I would categorise both Lidl and Aldi as ‘limited brand’ supermarkets – when you shop in them, you don’t necessarily get the brands you are used to, nor do you get the great plethora of options for each food item that you do elsewhere.

Instead, you get a limited choice of own brand and other brands – far fewer options of your tinned tuna than in a large Tesco store. But this is the defining point – a limited number of choices doesn’t necessarily limit quality.

So my question, which I’d love you to feedback on below is; what is YOUR perception of Lidl and Aldi? And do say whether you shop there or not.

Buy Zara clothes at a fraction of the cost, and get a flight thrown in

If you’re one of the millions planning a trip to Spain at some point this summer, stop shopping at Zara right now. The giant Spanish fashion brand sells clothes in its native country far cheaper than here, so wait until you get there if you’re planning on buying something.

The price difference is enormous. The pound price is often higher than the euro price before you even convert the currency (which further cheapens the euro price).

And while you can’t get English delivery from its Spanish website, the big boon is it gives you the option to select ‘English’ as the language so you can browse in advance for pricing research purposes.

In fact, with budget airline prices as cheap as they are, if you were planning a Zara stock-up, it may be cheaper to find a dirt-cheap Spanish flight and go purchase an armload.

From the Spanish website (English language selected)

CHAMBRAY BLAZER WITH ELBOW PATCHES AND BADGE

99.95 EUR

From the UK website (at the same time)

CHAMBRAY BLAZER WITH ELBOW PATCHES AND BADGE

129.00 GBP

Using TravelMoneyMax to convert at the top card rate, this shows the pound cost of this jacket is currently £81. In other words, it’s £50 cheaper than the same jacket bought in the UK.

In some cases it’s cheaper to fly to Spain and buy there

Doing only a touch of research (see my Cheap Flights guide), I found a Ryanair flight to Santander in Spain (not the bank), for £42 return (hand luggage only). So it would actually be cheaper to jump on a plane to Spain and buy the jacket there.

Of course I’m using some journalistic licence here to prove a point. You’d obviously need to get to and from the airport and may want a hotel. Yet if you’re a Zara fetishist and are stocking up for yourself and your family (and perhaps taking orders for friends too), the economics could work.

This is especially powerful as Zara rarely gives out vouchers or discount codes. To get reductions you’re reliant on waiting for things to move into the sale – so there are only limited opportunities for reductions on full-price goods.

I did check if you could cut the cost at Zara by nipping over the Channel, yet rather interestingly there’s no homogenised euro price. On the Zara France site, for example, the same jacket is €139, not that much less than in the UK.

On average, Zara in Spain is 39% cheaper (at current exchange rates)

I chose four more items at random on Zara, all of them cost less in euros than the pound figure, and I checked the price on both the Spanish and UK sites at the same time.

  • (WOMENSWEAR) CROSSOVER STUDIO DRESS WITH BELT €60 (converts to £48.50). Price on UK site £79.95, so 40% cheaper in Spain.
  • (WOMENSWEAR) LEATHER CLUTCH WITH FRINGES €79.95 (converts to £64.70). Price on UK site £119.95, so almost half price (47% cheaper) in Spain.
  • (MENSWEAR) HAWAIIAN PRINT SHIRT €29.95 (converts to £25). Price on UK site £39.95, so 37% cheaper in Spain.
  • (GIRLS’) FAUX LEATHER JACKET €39.95  (converts to £32.30). Price on UK site £42.95, so 25% cheaper in Spain.

Overall, for the five items on the Spanish site, the price is £203; while the same items on the UK site are £331 – that means on average, it’s 39% cheaper in Spain, though of course it’s worth noting that not all stores carry all stock. So there is a chance that if you’re after something very specific, it won’t be in the store there.

I’d love to know which other big store chains are proven to be far cheaper, and are only a relatively short flight away.

The Government has sold people out over Erudio student loans

The Government has sold people out over Erudio student loans

The Government has sold people out over Erudio student loans

Last December I blogged to put people’s minds at ease over the student loan sell-off. Many had worriedly asked me if there would be big changes and I explained that no, there shouldn’t be as the Government had guaranteed no changes to the loan terms and conditions. Well, I was wrong. 

With the benefit of hindsight, the promise of no changes to terms and conditions was underwhelming. What was needed was a guarantee that the customs and practice of the Student Loans Company’s (SLC) dealings with borrowers would remain when loans were transferred to Erudio.

The MSE Forum is rammed with former students who are struggling with Erudio, the company that has taken over the student loans. My Twitter feed has been jammed too. Has the Minister David Willetts responded? No. He’s kept schtum.

On Thursday, I covered this in detail on my Radio 5 Consumer Panel and told Erudio exactly what I thought. Now, I want to quickly bash out a few more thoughts. 

The basics – what loans have been sold?

We are talking here about loans given to students who started university between 1990 and 1997 – known as "pre-1998 mortgage style student loans".

Unlike today’s loans, where once you go over a threshold you repay in proportion to your earnings, here the threshold is a cliffhanger. 

If your income is under £28,775 a year you needn’t repay a penny. If it’s more, you usually repay the full whack in 60 equal monthly instalments.

The loan wipes 25 years after you graduate, or when you hit 50, whichever is sooner. So many who started in 1990 and deferred are not that far away from having their loan wiped, which is why continuing deferment now will make a big difference.

Just as crucial is how these loans are repaid. Under the current system, repayments are taken automatically via the payroll, but old-style loan payments are primarily collected via direct debit, just like a normal bank loan (and those who have these loans are required to have a direct debit set up in case they earn over the threshold).

For more info on all the loan types, see my Should I Overpay My Student Loan? guide.

Erudio loans – what’s gone wrong?

The sale of pre-1998 loans to Erudio has caused three major problems which have left some borrowers struggling. A few have even reported sleepless nights over the stress of it.

1. The form is far more invasive.

Under the Student Loans Company’s administration there was a form to "apply for a deferral of repayment", which was two pages long and you filled it in if you didn’t earn enough.

Now there’s an untitled form, admittedly far more clearly laid out, which you fill in effectively as a fact-find for Erudio.

The difference in presentation speaks volumes. The first appears as a ‘fill this in if you want to defer’, the second is a ‘tell us about you and we’ll decide whether you can defer’ – seemingly abrogating the decision away from the borrower to the loan company. 

Couple this with the fact it asks for far more detail about employers, income and child support and you can see why this nuanced change in stance has left many concerned and nervous.

2. Erudio is handing over information to credit reference agencies.

The Student Loans Company (SLC) only registered information with credit agencies when someone defaulted – in other words – they didn’t pay when they were supposed to. Erudio, on the other hand, is telling credit reference agencies about all those with outstanding loans that are deferred.

In my view, the sell-off of student loans should not change how the student interacts with the repayments system. But it has. When I asked Erudio why it’s doing this, it told me it’s because in order to get information from credit reference agencies it has to give it to them, and it wants this info so it can "treat each borrower as an individual in a way the SLC never did".

So how does this fit with the Government’s promise of no changes to terms and conditions? Well, technically the SLC did have the ability to do this. It just chose not to for the last 20 years.  

But I think this creates a legitimate expectation for people who have these loans that this was a standard operating system, part of the custom and practice of the way the loans work. 

As the Financial Ombudsman Service can adjudicate on pre-1998 student loans (not later ones), and one of the factors it looks at is "standard industry practice", it would be interesting to know what’d happen if someone took a complaint to it on this (my assumption is it’d be rejected, but you never know).

It is worth noting though that the inclusion of this data on credit files won’t necessarily be negative for individuals. It’s a balance of the fact that you’re managing credit well versus having more outstanding credit. See the Erudio to credit-score student loans news story for more.

Ultimately though, the problem seems to be that the SLC ran on not much more than an ‘if people say they don’t earn enough, they can defer’ system, while Erudio is far more focused on being meticulous. However, I’d argue that in some ways borrowers had a legitimate expectation that the SLC’s approach would continue.

Erudio says it wants to provide a bespoke system for each borrower. It believes many who deferred in the past shouldn’t have been deferred, they should have been given forbearance (ie, they are eligible to repay, but should in special circumstances be let off doing so) and it wants to look at each case individually. 

That sounds all well and good, but people have had the same system for 16 years and now Erudio is interrogating the data in a very different way. That leaves many upset.

3. Payments are being taken when they shouldn’t and without notice.

This one is just pure cock-up territory. People are reporting in their droves that they are having payments taken by direct debit even though they are deferred. It’s worth noting that Erudio itself isn’t doing the deferrals, it’s sub-contracted that to Capita.

This has left some facing overdraft charges or a credit score impact. Erudio says it has fixed the issue for the 50 affected; yet I think that’s an underestimate of the true numbers. I’ve had roughly a dozen people contact me on Twitter alone – I can’t believe a quarter of all the people in the country who’ve had this happen have got in touch with me on Twitter! Normally it’s a fraction of one per cent.

Even though we must partially accept that human error can and will happen, there are systemic issues too. The direct debit regulations say you must inform somebody of the amount of payment you will take and when that payment will be taken in advance, and that clearly hasn’t happened here.

Erudio says it will put things right, but I don’t think it has a clue how this operates.

Overall, Erudio hasn’t been fit for purpose. I’ve had woeful reports of its customer service, and some people haven’t even been able to get through to it. The company clearly under-resourced this and didn’t expect to see this kind of public response.

Staggeringly, when this issue first hit, Erudio didn’t even have a press office – seemingly it hadn’t anticipated any media interest in one of the hottest of political hot potatoes.

The Government must accept responsibility

The Government has mishandled and miscommunicated this. We’ve been nagging it, but have just received generic statements from the Department for Business Innovation and Skills. The minister, David Willetts, hasn’t said anything.

As someone who was relatively sanguine about the sale of the student loan book believing it was only a back-end operation that wouldn’t really change much for those with outstanding loans – I’ve now changed my mind. 

Having seen this mess, it would take a lot of persuasion to get me to believe that it’s worth the risk to sell any more of the student loan book.

I’d love your thoughts…

Ps. If you’re having problems with Erudio, remember that pre-1998 loans are covered by the Financial Ombudsman Service. So make a formal complaint to the company, and if you don’t feel it has treated you fairly, you can then take it further. For full help see our Financial Ombudsman Service guide.