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
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
