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Debt charities call for stricter controls over payday loan ads

Debt charities have called for a clampdown on payday lending marketing following news that Wonga had lent £1.2bn in short-term loans to borrowers in 2012.

Wonga_logo

Yesterday, Mortgage Strategy pointed out that Wonga’s gross lending total last year was nearly £300m more than the £925.7m the entire equity release sector advanced last year.

While Wonga does not lend mortgages, at £1.2bn its lending figures put it fourteenth, joint with the Principality Building Society, in the top 20 lenders table which was published by the Council of Mortgage Lenders last week.

The lender served over a million borrowers, issuing over 3.8 million loans in 2012 which indicates many of these customers are returning and taking loans on a repeated basis.

Wonga’s 2012 lending total is 68 per cent up on the £707m it lent in 2011, leading debt charities to call for the marketing strategies employed by payday lenders to be controlled like they are in the tobacco industry.

Debt Support Trust director Stuart Carmichael says: “I feel that the advertising ability of these types of companies needs to be controlled, much like the way the Advertising Standards Authority controlled the ability of the tobacco industry to advertise.

The payday lending world is very much geared towards ‘get it today, get it as quickly as possible’ and the message that goes out through these adverts is that technology makes the process pretty much instantaneous and simple. That simply isn’t safe. Ultimately people have a choice but those in a vulnerable situation need to be protected.”

Debt Advice Foundation communications manager Linda Isted says: “In our view, the principal issue regarding payday loan firms is the style and scale of their marketing efforts. The parallel I draw here is with the tobacco industry as an industry in which clever marketing creates massive demand.

“The marketing is very comforting and cosy; in one advert you can see a pair of grannies mixing up a bowl of cereal and in the next they are flogging credit at extremely high rates of interest. It does at times seem disingenuous.”

A Westminster summit in July hosted by consumer minister Jo Swinson debated the notion of daytime advertising for short-term, high-interest loans which many feel targets the low-waged and unemployed.

At this summit the idea of placing a ban on such marketing, similar to the ban placed in 2002 on tobacco advertising anywhere other than at specialist tobacconists.

Various councils have reportedly banned payday lender websites being viewed on their computers and some have reportedly attempted to ban payday lenders advertising on billboards.

Isted adds: “What happened with the tobacco industry is that despite many calls for cigarettes to be banned, what eventually happened was that the marketing was controlled so far that they weren’t constantly in the public vision.”

The Financial Conduct Authority will take over regulation of the payday lending industry in April 2014.

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