Payday (or High-Cost Short-Term) loans have been one of the most contentious advertising sectors for a few years now. The ASA and CAP have performed a number of reviews of how the rules are working and what kind of claims can be made, the most recent of which focussed on trivialising credit. Here’s a quick overview of the current state of play.
What is a payday loan?
The Financial Conduct Authority (FCA) sets the definitions for financial products. A High-Cost Short-Term loan is credit offered with an APR of 100% or greater, and which must be repaid, or mostly repaid, within 12 months.
The key rule which the ASA use when considering complaints about trivialising credit is one of the broadest, with applications well beyond financial ads:
1.2 – Advertisements must be prepared with a sense of responsibility to the audience and to society.
Taking out credit is a serious financial decision which should be treated in such a manner in ads. Anything which makes it seem like payday loans are a fun, quick thing to be taken out without due consideration, for frivolous non-necessary reasons or on a regular basis is likely to be seen as a breach of the Code.
Focusing on how quick and easy the process of getting a loan is, even if it’s an accurate depiction of the process, could be seen as trivialising credit. This is particularly the case if any implication of the speed of the process takes precedence over the ‘serious’ factual elements such as the APR.
Going on a shopping spree isn’t considered an acceptable reason to take out credit. The same goes for holidays, and other things which are avoidable expenses. What’s considered an unavoidable expense could vary depending on circumstances, so context is always important. One-off unexpected bills for things such as white goods or car repairs could be acceptable depending on the presentation of the ad.
Loans shouldn’t be advertised as a long-term solution to financial problems, or as a top-up for wages. As above, a one-off bill may be a justifiable reason but ongoing bills are not likely to be acceptable regardless of context.
Regardless of the messaging in the ad, the tone on its own could render an otherwise fine ad unacceptable. Songs, jingles or a catchy, rhyming VO are likely to be seen as too light-hearted or distracting from the seriousness of the product. Animation should be used with great care, particularly if it’s likely to appeal to kids. This doesn’t mean that loan ads have to be dour and full of people in suits, but any light-heartedness mustn’t distract from the seriousness of taking out a loan and the important financial information in the ad (like the Representative APR).
CAP has published a guidance note on this very topic, which you can find here.
It was recently decided that HCST credit ads do not need to be given a scheduling restriction to keep them away from children; nevertheless treatments must not be of particular appeal to children.
There are a great many other things to consider in credit advertising, many of which are legal issues stemming from section 3 of the Financial Conduct Authority’s regulations here. We will always ask for agencies and advertisers to provide a legal view on the presentation of the financial information in proposed ads. Our Knowledge Base hosts a Consumer Credit Act compliance form which you can download here.