After almost a year of investigation, BCAP, the advertising watchdog, has finally published the results of its extended review of payday loans advertising on television. It conclusively found that payday lenders are not actively targeting children but will be asking for views on when adverts appear through a consultation this summer. Russell Hamblin-Boone looks at the facts and the fiction about advertising of short-term loans.
Advertising academic Jef I. Richards once said "I wish all consumers were as gullible as advertising's biggest critics. Anyone who believes advertising is that powerful will believe almost anything."
And while the critics of the advertising of short-term (payday) loans are no fools, they have built up a head of steam in spite of the overwhelming evidence that contradicts their views. This did not go unnoticed by the House of Lords when it rejected the inclusion of specific clauses restricting the advertising of payday loans from the Consumer Rights Bill which received Royal Assent on 26 March.
However, BCAP was asked to extend its review of payday advertising, which began in July 2014, to include scheduling as well as the content of the adverts.
Concerns remained about the potential impact on children who see payday loan adverts. Although unsubstantiated, the claims range from the 'grooming' of children to become conditioned to accepting high-cost debt as a part of life through to the adverts encouraging pester power with children nagging their hapless parents to get a loan on a whim.
The BCAP review has now found irrefutably that there is no substance in these claims. Quite simply payday lenders do not target children with their advertisements and encourage them to ask their parents to take out a payday loan.
However, the critics also talk as though children are viewing back-to-back adverts for short-term loans. The truth is that even in 2012 when the industry was at its peak, payday loan adverts were a trickle, not the deluge that is assumed. Indeed, Ofcom found that payday advertising accounted for just 1.2% of all advertising across all commercial TV channels and, more crucially, just 0.7% of all TV adverts seen by 4-15 year olds.
Undeterred, critics have continued to call for a ban on adverts being shown before 9pm so that children will not see them and BCAP has agreed to run a public consultation on the issue of the scheduling of payday loan adverts.
A pre-watershed advertising ban might make sense to those nostalgic about the TV age, but completely ignores modern viewing habits in the era of multi-screen, catch-up/on-demand viewing. In any event, only half of payday loan adverts were shown on daytime TV in 2013 and, although there may still be an old-fashioned view that children should be tucked up in bed early, the reality is that over a quarter of TV watched by 4-15 years olds is broadcast after 9pm.
But surely only financially vulnerable people like students and the unemployed watch TV during the daytime, which makes such advertising irresponsible, came the cry. Hardly, this is the 21st Century. 14% of people now work at home and three quarters of those are in some of the highest skilled jobs in the economy . 4 in 10 people watch TV whilst working. The rolling news channels are one of the most popular channels for business people. Besides this, many people working at weekends have a mid-week day off.
And let's not forget that short-term lending is heavily regulated and has been scrutinised like no other credit market. High cost short term credit providers abide by the same advertising and marketing laws and regulations as all other consumer credit providers. With three regulators - The Financial Conduct Authority (FCA), the Advertising Standards Authority (ASA) and Ofcom - the industry's advertising is well policed.
Misleading adverts can be and have been banned and the FCA has the power to remove irresponsible lenders from the market altogether.
The ASA's own statistics reveal that payday loan advertising rarely breaches the rules. In 2013, the ASA received complaints about more than 18,000 adverts. Of those, the ASA ruled on 169 financial adverts of which just 11 were for payday loans and only eight of them had to be amended or withdrawn. This is a very small number in an age where we are bombarded with advertising on myriad channels 24/7.
Nonetheless, as the FCA found in its recent thematic review, short-term lenders are on a path of improvement and the CFA is in the vanguard of change. Having paved the way for the FCA's rules our members have long since committed to ensuring their adverts do not appear on children's channels. More recently they reinforced their commitment to marketing their products responsibly by voluntarily agreeing a series of guidelines that address areas of potential concern relating specifically to loan products.
The guidelines include working with broadcasters to avoid programming where children are expected to form more than 25% of the audience, and ensuring the content of the adverts on TV and radio does not, by nature of its creative design, appeal specifically to children.
This is what you would expect of an industry that is responsible and regulated. CFA members have reviewed their media planning and creative approach to address the scheduling and content concerns. They voluntarily submitted their advertising schedules to BCAP for consideration during the review and will also respond to this summer's BCAP consultation with further evidence.
Short-term lenders have proven themselves to be committed to responsible advertising, continual improvement and consumer protection. Yet some guarantor lenders and other credit providers still advertise widely, using many of the techniques that payday lenders have been told are unacceptable.
My hope is that the scope of the public consultation is tightly defined so that public perceptions and concerns about other financial providers who advertise on TV are not wrongly applied to payday lenders. I am sure that the Committee will consider hard evidence of harm over personal prejudices before making rules that could restrict advertising to a broad audience. It is time to focus on consumer protection through a holistic review of the market and end the witch hunt against short-term lenders.
Russell Hamblin Boone is Chief Executive of the Consumer Finance Association - the principal trade body representing the interests of major short-term lenders in the UK.
The statistics in this article are from various official sources which are all detailed in an infographic which is available here