A group of MPs has joined MoneySavingExpert.com's calls to ban payday loan adverts from being shown on children's TV.
The cross-party Business, Innovation and Skills (BIS) Select Committee says children's programmes are "not an acceptable place" for payday loan adverts, and adds further action is needed to protect consumers from short-term high interest lenders (see our Payday Loans guide for alternatives if you're struggling).
MoneySavingExpert.com creator Martin Lewis warned the committee last month (watch the session on the Parliament website) that lax rules on payday loan advertising risk inuring a new generation to the dangers of these loans of last resort (see the Payday loan ads should be banned from kids' TV MSE News story).
Labour leader Ed Miliband has also backed MoneySavingExpert.com's campaign, warning his party would change the law to ban them if necessary (see the Miliband backs MSE's call MSE News story).
Earlier this month, research from broadcast regulator Ofcom found children aged 4-15-years-old saw 596 million payday loan adverts in 2012 – up from three million in 2008. This meant the average child saw 70 payday loan adverts last year.
Martin says: "We're delighted the select committee is also calling for a ban on payday loan ads on kids' TV.
"When I gave evidence to the committee, I called on it to act as the current explosion in the number of people borrowing in this way is nothing compared to how the next generation will act.
"From our own research, we know children ask their parents to get a payday loan to buy them toys. Whilst parents have the power to say no, it's evidence that kids see this dangerous type of niche borrowing as part of everyday life.
"The BIS Select Committee and Labour Party both support our call for an outright ban on these ads on kids' TV. Now we wait for the Government to act."
What are the MPs calling for?
As well as calling for a ban on payday loan adverts being shown around TV programming aimed at children, the committee has also made recommendations to coincide with the Financial Conduct Authority's crackdown on the industry (see the Payday lending crackdown MSE News story). These include:
- Limiting the number of times a payday loan can be rolled over to one. Payday lenders use rollovers to continuously extend customers' loans, so while a loan may be advertised as lasting for a month at a small cost, it's often rolled over time and time again and will end up lasting much longer. The committee says the FCA's proposal to limit the number of times a loan can be rolled over to two is a "welcome development", but doesn't go far enough.
- Making lenders give three working days' notice before taking money directly from bank accounts. The committee agrees with the FCA's proposals to limit the number of loan repayments lenders can attempt to take from customers' accounts to two per loan. But it also says lenders should be made to give three working days' notice before using a continuous payment authority. It adds each notice should make clear the customer can cancel the authority.
- 'Health warnings' should be prominent. The committee agrees with the FCA's proposal that all payday adverts should include both a 'health warning', and directions to debt advice services. But it also says the warning should have the same prominence as the rules on APRs, and that it should be repeated at every stage of the application process.
- Affordability tests. It says each firm should be forced to resubmit its affordability test – how it assesses customers who want a loan – to the FCA for approval, or face being banned from operating.