Financial News

  • 23 December 2013, 2:15

Ban Payday Loan Ads On Kids' TV, MPs Say

Payday lenders should be banned from advertising on children's television to stop young people believing that getting money is "easy", MPs have urged.

The Business, Innovation and Skills Committee (BIS) recommended stopping advertising on programming aimed at children after hearing fears that the next generation is being "groomed" towards borrowing money.

Recommendations by MPs also included tackling nuisance emails and texts to people who are "at their lowest ebb", forcing lenders to contribute cash towards debt advice and improving the way they share information.

The committee heard evidence from consumer campaigners who warned that "cartoon puppets" used on payday lenders' adverts suggested that taking out a loan can be fun.

Martin Lewis, founder of consumer website MoneySavingExpert.com, said: "From our own research, we know children ask their parents to get a payday loan to buy them toys.

"Whilst parents have the power to say no, it's evidence that kids see this dangerous type of niche borrowing as part of everyday life."

Wonga, one of Britain's most high-profile payday lenders, is well 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.

But a Wonga spokeswoman 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."

The Consumer Finance Association (CFA), whose members include The Money Shop, Quick Quid and Cash Converters, also said its members do not advertise on children's TV channels.

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."

The rapid expansion of the payday firms and a rocketing number of calls for help being made to charities by people drowning in debt are "not unrelated", he said.

The committee called for a levy paid by payday firms, under regulatory requirements, to be ringfenced by the Money Advice Service. This money could be used to boost the provision of debt advice to struggling borrowers.

The estimated size of the payday loan sector has doubled over a five-year period to be worth around 2.2bn.

Payday lenders have come under intense criticism this year, with the Office of Fair Trading (OFT) referring them to the Competition Commission for a report due out in 2014.

The Government announced plans last month to place a cap on the total cost of a payday loan.

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