Payday lenders want to financially groom the next generation of borrowers. They’ve plastered their adverts on children’s TV channels and family TV shows, used puppets and kid-friendly slogans, and even had people in Disney-esque costumes handing out lollipops in the streets.
These ads pressurise parents with pester power
This is a danger for our entire society. It pressurises parents with pester power, in our poll one in three parents reported that their under-10s had repeated payday loan slogans, and 14% shockingly said that when they had refused to buy something, their under-10 nagged them to go to a payday lender.
One five-year-old even asked for money from Wonga as a Christmas present from his parents. This is no surprise, as the number of these adverts seen by children increased from 3 million to 596 million in the four years to 2012 alone.
They normalise this niche lending for the next generation
Yet more damaging is the fact that they normalise this type of niche borrowing for the next generation – inuring them to the livelihood damage this type of high-cost lending can cause.
The House of Lords has a chance to stop this
That’s why this Wednesday we need members of the House of Lords to grab the opportunity to back an amendment to the Consumer Rights Bill which would put restrictions on payday loan advertising, similar to those for gambling, alcohol, tobacco and junk food.
Specifically, it would ban payday TV and radio ads before the 9pm watershed – according to Ofcom research, this is when the majority of such ads are broadcast. A second amendment would stop firms cold calling people to offer payday loans.
Many of us have been campaigning on this for years, naming and shaming the payday lenders. Thankfully that pressure has started to have an impact – for example, payday lender poster boy Wonga has pulled its puppet adverts and is taking its sponsor logo off children’s Newcastle United replica shirts.
Yet this isn’t enough. There’s a lot of unprincipled money being spent in this area – and we can’t rely on lenders’ goodwill, we need legislation to cut it dead and protect our children.
Those whose job is to protect young people’s interests are vocally behind this too – the Children’s Society is a prime lobbyist for this ban and a joint report between it and debt charity StepChange recently showed how family debt causes children to suffer from worry and anxiety, experience bullying and miss out on the basics of life.
A third of children surveyed by the Children’s Society found payday loan adverts to be fun, tempting or exciting – and this group were much more likely to say they would consider using a payday loan in the future.
The growth of the payday loan industry is frightening. It didn’t exist at any scale seven years ago. It’s a self-manufactured industry built by technology, marketing and advertising. It has made billions based on lending without a care, at wince-worthy cost, regardless of affordability, and snatching back cash heedless of the effect on the borrower.
Thankfully some of the industry’s nastiest tricks – such as using recurring payments to snaffle every penny coming into people’s bank accounts day after day – have been regulated away. However, the Government’s sloth, failure to heed warnings and laissez-faire market policy means millions have already been burnt. Its belated but welcome regulatory volte-face only came after campaigners and other parties started making political capital by attacking such lenders.
Since then the regulator has kicked into action – write-offs of millions by Wonga as part of the supposed cleaning up of its act, fines for sending threatening fake lawyers’ letters and thankfully, soon, new limits on charging, though these are not quite as stringent as I’d have preferred as people still risk paying back twice the amount borrowed.
Of course, you can’t solely blame irresponsible lending – we need responsible borrowing too. This year financial education joined the English National Curriculum and that should help, but it’ll take time. And it won’t help adults who already lack financial capability, are vulnerable or have mental health or capacity issues.
We also need to promote alternative ethical borrowing – through credit unions, using (the sadly much-reduced) Government Social Fund loans, and of course, better budgeting to avoid the need in the first place.
The Church of England has valiantly vowed to try and compete lenders out of business by opening credit unions in churches. However, much payday lending is a technology play as well as financial, targeting people’s impulses (sometimes late at night when they are drunk watching gambling programmes) for instant cash.
The Church can’t, and won’t, compete with that. Nor should it offer to lend to people who can’t afford to repay. But some payday lenders do, knowing they can use hard-core tactics to get money back.
So we cannot allow the good being done in financial education and capability work to be wiped out by powerful multimillion pound payday loan ad campaigns. We’re already at a dangerous point in the growth of payday loans – if it goes on unchecked, just imagine the dystopian future in 10 years.