Adverts for short term loans could soon face stricter regulation, following the advertised survey by the Office for Fair Trading of Britain’s 50 biggest instant cash loan companies.
The OFT has surveyed these companies’ websites and wants the Department for Business, Innovation and Skills to rein in the ads unless the companies themselves limit what they are advertising. The OFT has written to seven key trade bodies that represent the industry asking them to tidy up their act or face the consequences.
The Consumer Affairs Minister, Norman Lamb, said that it waited with interest for the response by the industry representatives and would act to regulate if there was no reaction.
The criticisms are of four key areas: the lack of clarity in interest rates of the short term loans, the targeting of vulnerable groups in society, the promotion of frivolous and unnecessary spending and then lack of credit checks to ensure that those who take out the loans are capable of paying them back.
The criticisms have been rumbling along for some time now before the OFT was forced into action and include MPs on all sides of the political spectrum as well as those involved in debt counselling and charities like Shelter.
The two largest spenders when it comes to advertising are Wonga and QuickQuid. Wonga has already fallen foul of the Advertising Standards Authority over adverts that had been aired on TV not long ago and had to be pulled.
One of these suggested to students that loans were better from Wonga than anywhere else, but the ads made no mention of the slight difference in interest rates that students might have to pay back: as much as 4000% or more for Wonga, while standard student loans from regular credit providers are offered at 1.5%.
Wonga was also criticised at the same time for advertising its instant cash loans to students for holidays in the Canaries and elsewhere.
Previously, the ASA had removed another Wonga ad which had been criticised as too lighthearted and misleading. The student ads were labelled cynical and predatory by a number of commentators.
One 29 year old man when questioned about his experiences with short term loans that he had borrowed said that Wonga just did not understand the seriousness of the situation when people were severely in debt and had to get loans from wherever they could. People do not go to a loans company for “funny or light hearted reasons” he said. This man owed about ₤2000 to a number of short term loans lenders and was borrowing more money each month from a different lender just to pay back the interest on his existing loans.