Payday loan firms lure borrowers into debt with pictures of exotic holidays, City watchdog warns

Payday loan firms lure borrowers into debt with pictures of exotic holidays, City watchdog warns

  • Payday loan firms were accused of ‘normalising’ of 1000 per cent interest loans
  • The Financial Conduct Authority said firms are enticing customers to borrow 
  • It added it is too quick and easy to get these loans that people cannot afford

Payday lenders are using pictures of exotic holidays to tempt borrowers into taking out loans they cannot afford, the City watchdog warned yesterday.

The high-cost credit industry was accused of ‘normalising’ the use of loans that charge interest rates of more than 1,000 per cent – compared with a typical credit card rate of 20 per cent.

A report by the Financial Conduct Authority said firms are enticing customers to borrow more than they need by routinely marketing the maximum loan amount in emails and text messages.

It added that it is often too quick and easy to get these types of loans, with the money arriving in customer accounts within just a few hours.

Payday lenders are using pictures of exotic holidays to tempt borrowers into taking out loans they cannot afford, the City watchdog warned yesterday

This encourages borrowers to make rash decisions they may regret, the FCA said. 

It added that some lenders are acting irresponsibly by continuing to offer expensive loans to those who are already in debt and have no way out.

The report said: ‘We also saw some evidence of firms suggesting how customers could use additional borrowing, for example, taking a holiday and reinforcing the message by including imagery of exotic locations. 

‘There is a danger that some customers could be susceptible to suggestive marketing behaviour that could adversely impact their decision-making around reborrowing.

The high-cost credit industry was accused of ¿normalising¿ the use of loans that charge interest rates of more than 1,000 per cent. Pictured: Tourists wearing face masks in Brittany earlier this week

The high-cost credit industry was accused of ‘normalising’ the use of loans that charge interest rates of more than 1,000 per cent. Pictured: Tourists wearing face masks in Brittany earlier this week

‘For those customers who are vulnerable or financially stretched, the impact of adverse influence could lead to harm.’

With unemployment soaring and many households suffering financial difficulties, experts warn that borrowers could end up in a debt spiral if firms continue to use these tactics.

Since the start of the pandemic, nearly one million people have used high-cost credit products as a safety net to meet everyday living costs, according to debt charity StepChange.

Gareth Shaw, head of money at Which?, said: ‘It’s very concerning the regulator has identified inappropriate tactics being used that are encouraging people into more debt, particularly as it is often those who are most vulnerable who turn to this type of credit in the first place.’

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