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The Loan Arrangers. Is It High Noon For Wonga And Friends?

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At some point, perhaps four years ago, doorstep lending ('The Tallyman', as my grandmother would have termed it) suddenly became terribly old fashioned and parochial. Recession and financial misery inflated the market for non-bank lending at a terrifying rate and a bold new industry sector was born. Aware that those with the least cash were the most likely to require relatively modest loans, but were also most likely to be declined by traditional lenders, several firms saw their chance and brands like Wonga, Pounds-To-Pocket and Amigo entered our lives.  

Naturally, this new breed of lenders launched and maintained their businesses with some hefty advertising  - and via these campaigns, our attention was drawn to the interest rates involved. The figures were so eye-wateringly huge, they almost felt like jokes. Always running into the hundreds (and in some cases thousands) of percentage points, these deals appeared to be transparently greedy and alarmingly unfair. To me at least.
Not long after the appearance of these ads, I recall telling a colleague that I foresaw a spectacular disaster  involving the financially disadvantaged, hobbled by impossible debt, rolling over and over, until repayments ruined their lives. He suggested I was missing the point. The interest rate was based on a year-long loan, and this borrowing was only intended to last a short period of time - so the only difficulty was my misunderstanding of the process.

Well, this week has seen the government call a summit to explore whether these firms are indeed exploitative and targeting their services at an audience with little ability to manage them. Somebody is getting nervous - and with good reason. When US banks were handing out mortgages to the less well-off, this kind of activity was called 'sub-prime lending' and it precipitated a global crash which continues to undermine our wellbeing today.

But that's the political angle, and a debate for another time and place. Here, I'm interested in the part advertising has played in this nascent market, and whether it has any case to answer.

Back in January, Pounds-To-Pocket had their TV ad removed and censured. The Advertising Standards Authority found they had deliberately prioritised a 20% discount on a customer's first instalment over the actual annual repayment rate of 278%. It also decided the messaging was designed to capture an audience of borrowers who had a negligible chance of meeting their obligations. In summary, the advertisement was called 'socially irresponsible'.

Today, following the aforementioned meeting with government, the entire industry has been warned about its marketing.  Jo Swinson, the consumer minister, has said: "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."

There are several aspects of payday loan advertising which immediately strike me. First, the time of day at which the TV ads are scheduled. Almost without exception, they occupy slots in daytime shows. As the lenders claim their products are aimed at those with jobs who require 'tiding over' before their wages arrive (hence 'payday'), it seems strange that they would focus their marketing on a time period when the majority of folk are at work. Unless these loans are actually intended for the long-term unemployed or people incapacitated by illness.
Secondly, the tone of the campaigns is incredibly frivolous. Wonga is particularly prone to rather juvenile content, always featuring those hideous puppets of three old people. Diving into paddling pools, pretending to be disc jockeys, having birthdays - the trio spend the majority of each spot acting out a woefully weak script to a Nicholas Parsons' voice over.

Of course advertising rarely seeks to be dull or stuffy, but borrowing money - particularly at these rates - is a serious business. Surely the advertisers have a responsibility to reflect this. Unless they have a vested interest in making the whole process appear a bit of a laugh.
I always approach the state regulation of advertising with great caution, and have never had enormous faith in the ASA, but in the case of the payday loan companies I would be delighted to see their cynical, digital 'tallyman' ventures curtailed. 

Magnus Shaw is a writer, blogger and consultant.

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