As payday lenders bombard vulnerable consumers with direct advertising, it isn’t any wonder that some fall into a spiral of debt, especially at this time of year when money is getting tight.
Last summer, I took out a payday loan as part of a Which? Money investigation. We found widespread poor practice in the market, including inappropriate loan rollovers and unsolicited increases in the future loan amounts offered.
What I didn’t expect, though, was the aggressive level of targeted advertising which followed, tempting me to take on further debt.
Since borrowing £100 in August, I’ve received an email every few days offering a variety of promotional deals. In over 60 direct emails, one company alone has welcomed me back to ‘your trusted online lender’ with repeated offers of weekend funding, payments sent within an hour and loans of up to £1,500.
Several of the emails offered 10% or 15% off the monthly finance charge. Sounds like a bargain – until you consider the starting APR of 1,734%.
The company also sent letters to my home address (20% discount this time), as well as text messages to my mobile phone warning me that this was my ‘last chance to come back and save big’. This type of relentless pressure selling is dangerous and could encourage many consumers to apply for loans they neither need nor can afford.
No respite on high days and holidays
My birthday marked a new low point. Not only was I offered a 25% discount on new loans of up to £1,500, I was told ‘now you can get the money you need to enjoy your birthday worry-free’.
Not content with exploiting a day of the year that has nothing to do with high-cost borrowing, the same email offered me £20 for every friend I refer. A happy birthday for the lender perhaps, but not for my friends in the longer term.
And it’s exactly at this time of year, when people have overspent and money’s getting tight, that these companies will be ready to pounce.
While payday loans are undoubtedly expensive, there are other equally important problems in the market – targeting vulnerable individuals with repeated offers of near-instant credit for one. It’s no wonder that taking out one payday loan so often leads to a cycle of worsening debt.