The Advertising Standards Authority is beginning a serious crackdown on predatory payday lenders. A recent advertising campaign encouraging people to take out high-interest payday loans to finance a ‘£1,000 night out’ has been banned by the ASA in a serious effort to discourage aggressive payday loan advertising.
The advertisement in question was run by consumer financial firm First Financial, a leading payday lender specializing in high-interest loans for consumers. The payday loan company used SMS marketing tactics to broadcast the advertisement, sending a misleading text message to targets’ phones encouraging reckless borrowing.
Users targeted by the advertising campaign received a text message containing the following message: “Hi Mate hows u? I’m still out in town, just got £850 in my account from these guys www.firstpaydayloanuk.co.uk.”
The text message, which the ASA contends was designed to appear like a message from a friend or acquaintance, was misleading and improperly disguised as a non-commercial message. The Advertising Standards Authority also fined the company responsible for sending the messages, a Nigeria-based SMS marketing company.
Fines against the lending company were prompted by a series of complaints about the marketing messages, which consumers described as misleading and promoting poor values. Both the ASA and the consumers targeted to the campaign believe it’s irresponsible for lenders to promote high-interest loans as a social financing tool.
High-interest lenders have come under increasing scrutiny in the UK in recent years, with a flood of lenders entering the UK market after increasingly strict laws pushed a number of lenders out of the USA. The credit crunch and reduced average income figures have also increased the demand for high-interest lending services.
Despite claims from the payday lending industry that the advertising crackdown is inappropriate, both consumers and regulators support the effort. The ASA contends that it is not targeting the payday loan industry specifically, but will pursue lenders that use inappropriate or misleading tactics to market their loans.
