Celebrities told to think twice about appearing in TV adverts for ‘irresponsible’ high-interest loans firms
Debt advice bosses warn that glossy TV ads disguise misery of borrowers swamped by debt
Debt-counselling experts are calling on celebrities to stop promoting companies that offer easy access to unsuitable loans.
There are fears that lenders will continue to use television stars to promote their products at a time when changes to the benefits system are resulting in more people seeking credit. The loan firms advertise extensively on daytime television and over the internet. Several have used celebrities to promote their loans, some of which carry exorbitant rates of interest. Sponsorship deals with football clubs and prominent TV programmes are also a popular form of advertising.
There is particular concern about the use of celebrities to promote short-term loans, which can carry annual rates of interest that are as high as 5,000%.
Former pop star Kerry Katona was dropped last week as the face of Cash Lady, a payday loans company, after she filed for bankruptcy for the second time in five years. In an ad for the company, Katona told viewers they could borrow up to £300 “dead fast”. The company charges an annual percentage rate of 2,670%, although it claims actual interest rates are considerably lower because loans are paid back within days.
David Dickinson has promoted moneyshop.tv, which offers short-term loans that can carry APRs of more than 2,400%. Nicholas Parsons provided a voiceover for an ad for Wonga which has been attacked for its high interest rates.
Both the television presenter Carol Vorderman and the cricketer Phil Tufnell were criticised several years ago for fronting adverts for consolidated loan firms that lent against people’s homes.
Wonga also sponsors Newcastle United, Blackpool and Heart of Midlothian football clubs and attracted criticism last year for signing a deal with Ant and Dec’s Red or Black? show on ITV.
Debt experts said that it was time for celebrities and sports teams to exercise caution when contemplating sponsorship and advertising deals with loan companies.
“The glossy adverts promoting easy-access cash are a far cry from the devastating experiences of payday loans reported to Citizens Advice bureaux,” said Gillian Guy, chief executive of Citizens Advice. “Up and down the country, bureaux are helping people who are swamped with debt after a small, short-term loan ballooned into a long-term financial nightmare.”
Last year, the major short-term lenders signed up to a new code of practice designed to deflect criticism of how they operate. But evidence released by Citizens Advice last month found that the majority of lenders were breaking their pledges.
“Celebrity adverts and football sponsorship deals mask the hardship caused by irresponsible payday lenders,” Guy said. “Our evidence found that in many cases proper checks aren’t being carried out to establish whether borrowers can afford to repay the loans, and seven in 10 people go on to have repayment problems. Celebrities and high-profile organisations need to exercise caution before putting their names to industries that are causing so much misery.”
Consumer minister Jo Swinson, who hosted a summit on the lenders, last week said they must do “much more” to protect consumers. The industry, worth £2bn a year, has been referred to the Competition Commission by the Office of Fair Trading.