Tuesday, 23 August 2011

Dissecting Responsible Lending - part 2, advertising

Zero-credit is delighted to welcome Steve Perry, author of "When Pay Day Loans go Wrong" and founder of the campaign website, http://saynotopaydayloans.co.uk/, as a guest blogger. Steve will be challenging the responsibility of PayDay Lenders over a short series of posts this week. Read Part 1 here!

What is responsible advertising?


Whilst I appreciate that ultimately payday loan companies are businesses as much as any other and they exist to sell a product that will pay for itself, its overheads and ultimately a degree of profit, I believe their advertising techniques are far above and beyond what is acceptable.

Load at random any payday lender's website and you are generally greeted by a message, usually written into their responsible lending header, stating something along the lines of “payday loans are designed for short term borrowing, to cover the costs of those occasional times when an unexpected expense takes you by surprise”.

However, usually found in another area not too far away on the landing page, is another header explaining how you can borrow MORE each time you take out a loan, gaining higher trust ratings. Often there are offers to become a silver or gold member for being such a regular and valued customer, or entries into free prize draws for returning customers with unblemished records.

If a payday loan is supposed to be a short term solution for the unexpected, why is there so much advertising for repeat customers?

The simple answer is, there should be NO repeat customers for loans intended for the occasional blip in a person's planned monthly budget. Have a look at this example, taken directly from Payday Express’s recently revamped website:

Once you have had a loan with us and are an existing customer we will only carry out a credit check if you haven’t had a loan with us for two months or more, and you may select to bypass this.

Borrow once to borrow again and again, no problem, no credit checks, simple approval... And so it goes on.

The fact is that a person who is borrowing from a payday loan company on a monthly basis is not borrowing to cover occasional unexpected expenses – they are borrowing in an attempt to manage their regular cash flow.

Surely, if Payday lenders respected responsible lending, running a thorough check before approving a loan must apply to those customers who use the service the most?


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