The Advertising Standards Authority (ASA) has banned a payday lender from sending out misleading adverts via SMS text messages.
The advertising regulator took action against First Financial (UK) Ltd following 13 complaints from members of the public who received deceptive text messages advertising high-interest loans.
'£1,000 for a night out'
First Financial (UK) Ltd, trading as First Payday Loan UK, employed a firm called Akklaim Telecoms to promote its payday loan websites to members of the public. Akklaim Telecoms did this by sending out these outrageously misleading text messages to mobile numbers in its database:
Advert one: "Hi Mate I'm still out in town, just got £1000 in my account from these guys www.firstpaydayloanuk.co.uk"
Advert two: "Hi Mate hows u? I'm still out in town, just got £850 in my account from these guys www.firstpaydayloanuk.co.uk"
Advert three: "You have been pre-approved for up to £1000 cash today. Apply now at www.firstpaydayloanuk.com and receive your cash within 15 minutes, to opt-out reply STOP"
Five complainants argued that these text messages were unsolicited, while five objected that the first and second ads were irresponsible, because they suggested a loan should be used to fund a social life. Also, ten complainants objected that the familiar style of address in the first two ads did not make clear that the text messages were marketing communications.
'Irresponsible and misleading' advertising
Following an investigation, the ASA upheld all complaints against these ads.
First, the regulator ruled that -- in the absence of evidence to demonstrate the complainants had given their explicit consent to receive the marketing messages -- these ads were indeed unsolicited.
What's more, one complainant was registered with the Telephone Preference Service (TPS) in order not to receive marketing messages whether by telephone or text.
Second, the ASA criticised the content of the first two messages, which indicated that the senders had used a payday loan to fund a night out on the town. This gave recipients the message that socialising is an acceptable way to spend a payday loan. Therefore, the regulator ruled that the first two ads were irresponsible.
Third, the watchdog rapped the firms involved for sending out text messages giving the impression that they were private messages from someone personally known to the recipient. This misleading impression was strengthened because the senders' numbers were standard UK mobile numbers. As the messages did not clearly identify themselves as marketing communications, they were clearly misleading.
Due to multiple breaches of its advertising code, the ASA ordered First Financial and Akklaim Telecoms not to allow these ads to appear again in their current form. It also warned both firms to clearly identify text-message ads as marketing communications, and to send them only to those who had given explicit consent to receive them. The regulator also banned both firms from implying that payday loans were suitable for spending on a social life.
No fines, no penalties
Here's the remarkable thing about this judgment: despite their extensive abuse of the advertising code, neither firm was fined a single penny for this outrageously misleading campaign. They will pay no penalties for misleading the public, nor will they be banned from conducting business in the murky world of rip-off lending.
Personally, I feel that such widespread contempt for consumer protection should be punished with substantial financial penalties. For example, a £50,000 fine for each company would teach both a harsh lesson about running unfair, misleading and deceptive campaigns designed to lure vulnerable people into taking out extortionate loans.
In addition, I think that more could be done by other watchdogs to punish these offending firms. For example, the Information Commissioner's Office (ICO) could look into data-protection breaches at both businesses. Likewise, the Office of Fair Trading (OFT) could launch an enquiry to determine whether First Financial and its associates are fit and proper holders of a consumer credit licence.
Payday loans: a hot topic
Of course, this isn't the first time that payday lenders have fallen foul of the Advertising Standards Authority. On 28th May, the ASA admitted that "concerns about payday-loan providers have been a hot topic recently" and expressed its alarm about adverts being potentially misleading or socially irresponsible.
Just last month the ASA banned another misleading advert promoting payday loans. In this adjudication, the ASA banned PDB UK Ltd, trading as Cash Lady, from advertising loans in a misleading and socially irresponsible manner.
Following 30 complaints from members of the public, PDB UK was forced to stop its television ads for Cash Lady, fronted by TV 'personality' Kerry Katona. In this ad, Katona -- a former bankrupt -- said:
"We've all had money troubles at some point, I know I have. You could see your bank and fill in loads of forms, but is there an easier way to get a loan; check out www.cashlady.co.uk, with cash lady it's simple to apply for up to £300. It's dead fast too. If you're approved, the money goes straight into your account. So if you need extra cash go to www.cashlady.co.uk. Fast cash for fast lives. That's www.cashlady.co.uk."
Of the 30 complainants, 29 argued that the ad was irresponsible, because it focused on Kerry Katona's financial crisis and encouraged people in similar situations to borrow money. One complaint alleged that the on-screen text was blurred and unclear -- very important when the representative interest rate is an extortionate 2,670% APR.
Despite PDB UK arguing that these loans were short-term, for a maximum of £300 and not aimed at customers with "severe and long-term financial hardship", the ASA ruled against the lender and ordered this particular Cash Lady ad off the air. It has since been replaced by a less misleading advert.
Why not ban payday loan advertising?
Having spent a decade highlighting the perils of payment protection insurance, my aim is to do the same with payday loans. This industry is growing fast -- worth £500 million in 2006, it reached £2 billion in 2010 and has been predicted to be worth £3.5 billion next year.
My view is that payday lenders should given an outright ban on advertising, whether online, in print, on TV or anywhere else. Starved of the oxygen of publicity, these 'vulture lenders' would wither and die. Sadly, the ASA admits that it cannot "ban entire sectors from advertising altogether [as] this sort of action requires legislation and a decision from Government".
I think it's high time that the Government upheld legislation to severely regulate -- or even ban entirely -- payday lenders. For example, it could back Labour MP Paul Blomfield's Private Members' Bill to regulate and control the advertising, lending limits and overall costs of high-cost credit.
The Sheffield Central MP's Bill receives its Second Reading in Parliament on 12th July, but needs cross-bench support to become law. Let's hope it gets the backing it truly deserves. Otherwise, hundreds of thousands of vulnerable borrowers will continue to be fleeced by these legal loan sharks.