Ban payday loans adverts on children's TV, MPs urge
Business, Innovation and Skills Committee told youngsters are at risk of being 'groomed' by short term lenders
Friday 20 December 2013
A committee of MPs has called for a ban on payday lenders advertising on children's television, who are being bombarded by messages suggesting that asking for money is "fun", "easy" and "appropriate" from a young age.
The Business, Innovation and Skills (BIS) Committee heard evidence from consumer campaigners, who fear that the "cartoon puppets" used on adverts could give young children the impression that taking out a loan is fun and easy, warning that the next generation is being “groomed” towards such borrowing.
Figures from industry regulator Ofcom revealed that children aged four to 15 were exposed to 596 million payday loans adverts in 2012, up from three million in 2008.
Overall, the average child aged 4 to 15 saw 70 payday loans adverts last year, although only 3 per cent of them were broadcast on children's television.
Committee chairman Adrian Bailey said: "It is worrying that our children are being exposed to such an extent to adverts that can present payday loans as a fun, easy and appropriate way to access finance.
"Children's programmes are simply not an acceptable place for payday loan adverts," he added.
Recommendations put forward by MPs include tackling emails and texts encouraging people to borrow, forcing lenders to contribute cash towards debt advice and improving the way they share information.
Wonga, one of Britain's most high-profile payday lenders, known for its TV ads featuring a trio of elderly puppet characters named Betty, Joyce and Earl who explain the process of taking out a short-term cash loan to viewers, dismissed the criticism as a "myth".
A spokesperson said: “The idea that Wonga advertises on children's TV channels or programmes is a myth. We have a strict, long-standing policy not to advertise in this way.”
Similarly, the Consumer Finance Association, whose members include The Money Shop, Quick Quid and Cash Converters, said its members do not advertise on children's TV channels.
The estimated size of the payday loan industry has doubled since the start of the financial crisis with payday lenders coming under intense scrutiny over their lending practices.
The Office of Fair Trading warned that some firms appearing to base their business around customers with poor credit history and a pressing need to borrow.
The OFT added that it is difficult for consumers to identify or compare the full cost of payday loans, undermining competition over price for loans. The OFT has referred the industry to the Competition Commission, which will report next year.
Next year will also see oversight of payday firms pass from the OFT to new regulator the Financial Conduct Authority (FCA) which has already set out plans to crack down on the sector.
The FCA's plans include limiting the number of times payday lenders are allowed to roll over loans twice, forcing them to put “risk warnings” on their advertising and limiting the number of attempts lenders can make to claw back money if there is insufficient cash in a borrower's bank account to two.
Last month, the Government announced plans to put a cap on the total cost of a payday loan. The level of the cap is yet to be decided but will be included in the Banking Reform Bill, which is currently going through Parliament.
Additional reporting agencies
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