Financial News

  • 19 December 2013, 0:43

MPs Demand Crackdown On Payday Lender Ads

Payday loan companies should be barred from advertising during children's television programmes, MPs will demand in a hard-hitting report this week.

Sky News has learnt that the Business, Innovation and Skills (BIS) Select Committee will say on Friday that payday lenders should be restricted from buying media space during specific programming segments.

People familiar with the MPs' report said that it would also urge Ofcom to conduct a review of the use of cartoon-style characters in payday lenders' advertising.

However, they will stop short of calling for an overall ban on ads during daytime TV programmes despite the exhortations of some committee members.

The call for fresh restrictions will follow the disclosure last week by Ofcom, the media regulator, that children watch on average 70 TV ads each year for payday lenders.

The MPs are also expected to call for a limit on payday lenders allowing one extension to loans for borrowers who choose not to repay, an insider said.

If a clampdown on ads was to result from the report, it would affect the now-ubiquitous TV campaigns of companies such as Wonga.

Ofcom's research showed that payday loan advertising had grown to the extent that it now accounted for 7.3% of all finance ads on TV and more than 90% of all advertising linked to personal loans.

Ofcom added that on average 80% of children's TV viewing took place before 9pm, although nearly 6 per cent took place between 11pm and 3am the following morning.

Last month, George Osborne, the Chancellor, announced a u-turn when he said that the Government would limit the cost of payday loans.

Earlier this year, the sector was referred to the Competition Commission amid political anger about the activities of some short-term lenders.

In 2014, the industry will come under the remit of the Financial Conduct Authority, and the City regulator will have powers allowing it to ban advertising and impose a cap on interest rates charged by lenders.

In remarks published on its website this year, Wonga said that since 2007 it had "responsibly lent over 2bn and we now have over a million customers.

"We've done that despite declining three quarters of all first loan applications and ensuring a principal default rate (money lent that we don't get back) of around 7%. This is comparable to other forms of short-term credit, such as credit cards.

"We work hard to lend only to the people who can pay us back, and our mainstream services for individuals and businesses are now available across three continents."

A spokesman for the BIS select committee declined to comment.

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