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| Crackdown on payday loans advertising | Crackdown on payday loans advertising |
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| A crackdown on payday loan advertising is on the cards following a summit between regulators, ministers and lenders to address concerns over widespread problems in the sector. | A crackdown on payday loan advertising is on the cards following a summit between regulators, ministers and lenders to address concerns over widespread problems in the sector. |
| The Financial Conduct Authority, which is due to take over regulation of payday lenders in April 2014, will publish a paper outlining its approach to policing the £2bn market in the autumn, and said it had particular concerns about the way firms targeted their high-cost loans towards students and other young people. | The Financial Conduct Authority, which is due to take over regulation of payday lenders in April 2014, will publish a paper outlining its approach to policing the £2bn market in the autumn, and said it had particular concerns about the way firms targeted their high-cost loans towards students and other young people. |
| Speaking after the summit, the head of the FCA, Martin Wheatley, said an outright ban on payday loan adverts would be "quite an extreme option", but he did not rule it out. He said it "could be considered" if it was felt that the way advertising was being used could not be tackled via other methods. | Speaking after the summit, the head of the FCA, Martin Wheatley, said an outright ban on payday loan adverts would be "quite an extreme option", but he did not rule it out. He said it "could be considered" if it was felt that the way advertising was being used could not be tackled via other methods. |
| "I think there are lots of problems with advertising – the targeting of young people, children, students and so on," he said. | "I think there are lots of problems with advertising – the targeting of young people, children, students and so on," he said. |
| Payday loan firms, financial regulators and debt charities attended the meeting with the government's consumer minister, Jo Swinson. Asked afterwards if any of the firms present had accepted they were guilty of irresponsible lending, she said: "I think there was recognition from some around the table that there were things they could improve on, and that behaviour needed to change." | Payday loan firms, financial regulators and debt charities attended the meeting with the government's consumer minister, Jo Swinson. Asked afterwards if any of the firms present had accepted they were guilty of irresponsible lending, she said: "I think there was recognition from some around the table that there were things they could improve on, and that behaviour needed to change." |
| Swinson had previously said that evidence of widespread problems was "concerning". She added: "I have long had specific concerns about the advertising of payday loans, and my department has commissioned research to look into the effect of payday lending advertising on consumer behaviour." | Swinson had previously said that evidence of widespread problems was "concerning". She added: "I have long had specific concerns about the advertising of payday loans, and my department has commissioned research to look into the effect of payday lending advertising on consumer behaviour." |
| This research is due to be published in the autumn. | This research is due to be published in the autumn. |
| Payday lenders offer short-term borrowing at a high interest rate, and claim they are filling a gap in the market for consumers who are unable to obtain cash quickly from mainstream banks. | Payday lenders offer short-term borrowing at a high interest rate, and claim they are filling a gap in the market for consumers who are unable to obtain cash quickly from mainstream banks. |
| They are set to come under the Competition Commission's spotlight after a year-long review by the Office of Fair Trading (OFT) found that they focused on speed rather than price when competing for customers. Adverts tend to stress the swiftness and ease of borrowing, with promises of lending decisions and financial transfers within minutes. | They are set to come under the Competition Commission's spotlight after a year-long review by the Office of Fair Trading (OFT) found that they focused on speed rather than price when competing for customers. Adverts tend to stress the swiftness and ease of borrowing, with promises of lending decisions and financial transfers within minutes. |
| Several universities have banned advertising on campus after the National Union of Students found that the most vulnerable students were most likely to use high-cost lenders. | Several universities have banned advertising on campus after the National Union of Students found that the most vulnerable students were most likely to use high-cost lenders. |
| Recently, Guardian Money highlighted how some of the biggest lenders were using cute characters and gimmicks in their marketing, including an online cat show run by Wonga, and a Facebook-updating Kangaroo from Speedy Cash, which seemed designed to attract younger customers. | Recently, Guardian Money highlighted how some of the biggest lenders were using cute characters and gimmicks in their marketing, including an online cat show run by Wonga, and a Facebook-updating Kangaroo from Speedy Cash, which seemed designed to attract younger customers. |
| The Advertising Standards Authority has already taken some action, banning a Cash Lady advert which used Kerry Katona's financial problems to market its 2,760% APR loans, and a radio advert for Peachy Loans where the 1,918% interest rate was read as "nineteen eighteen". | The Advertising Standards Authority has already taken some action, banning a Cash Lady advert which used Kerry Katona's financial problems to market its 2,760% APR loans, and a radio advert for Peachy Loans where the 1,918% interest rate was read as "nineteen eighteen". |
| Ahead of the summit, some critics of the sector had called on the government to introduce a cap on the cost of loans. Martin Lewis, founder of the MoneySavingExpert website, tweeted that he had raised this issue: "As no one had said it, I pushed hard for a total cost cap on payday loans in the summit. Jo Swinson agreed FCA can and should look at this." | Ahead of the summit, some critics of the sector had called on the government to introduce a cap on the cost of loans. Martin Lewis, founder of the MoneySavingExpert website, tweeted that he had raised this issue: "As no one had said it, I pushed hard for a total cost cap on payday loans in the summit. Jo Swinson agreed FCA can and should look at this." |
| Swinson said this was discussed, but that such a move "brings with it significant problems [such as] pushing people towards illegal lenders or encouraging other types of fees and charges." | Swinson said this was discussed, but that such a move "brings with it significant problems [such as] pushing people towards illegal lenders or encouraging other types of fees and charges." |
| The FCA will have the power to set an interest rate cap on payday loans and restrict their duration and the amount of times they can be rolled over. However, a decision on whether this power will be invoked will not be made until 2014 at the earliest. | The FCA will have the power to set an interest rate cap on payday loans and restrict their duration and the amount of times they can be rolled over. However, a decision on whether this power will be invoked will not be made until 2014 at the earliest. |
| After the summit, Treasury minister Sajid Javid appeared to take a swipe at the OFT when he said that from next year the industry would be dealing with a regulator "with some real teeth". In May, the Commons public accounts committee said the OFT had been "ineffective and timid in the extreme" in regulating payday lenders. | After the summit, Treasury minister Sajid Javid appeared to take a swipe at the OFT when he said that from next year the industry would be dealing with a regulator "with some real teeth". In May, the Commons public accounts committee said the OFT had been "ineffective and timid in the extreme" in regulating payday lenders. |
| Delroy Corinaldi of StepChange Debt Charity said: "All advertising for payday loans should carry a health warning so that customers get a balanced view that includes information about the risks of using high-cost credit. In particular, companies must be clear that loans need to be realistic and affordable and are not a way to deal with long-term financial problems." | Delroy Corinaldi of StepChange Debt Charity said: "All advertising for payday loans should carry a health warning so that customers get a balanced view that includes information about the risks of using high-cost credit. In particular, companies must be clear that loans need to be realistic and affordable and are not a way to deal with long-term financial problems." |
| Richard Lloyd, executive director of consumer group Which?, said: "Positive noises about tough new rules have come out of the summit, but these must now be backed up with more concrete actions than we have seen today." | Richard Lloyd, executive director of consumer group Which?, said: "Positive noises about tough new rules have come out of the summit, but these must now be backed up with more concrete actions than we have seen today." |
| Lloyd called on the industry to "clean up its act without delay", adding: "More action is also needed by the whole of the credit industry and government to come up with new ways of providing affordable credit to people that need it and can afford it." | Lloyd called on the industry to "clean up its act without delay", adding: "More action is also needed by the whole of the credit industry and government to come up with new ways of providing affordable credit to people that need it and can afford it." |
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