Financial Marketing and the Moral Compass

The issue of whether marketing professionals should work with clients in controversial areas of business is certainly not new.  Alcohol, tobacco, gambling and pornography have fitted the ‘usual suspects’ bill for long enough. Increasingly, however, in the wake of the recent financial meltdown across Europe, we’re seeing a new contender in the unpopularity stakes.  You’ve probably noticed a new breed of financial services company that’s emerged recently in the UK – and they don’t enjoy a very good press. Yes, we’re talking about online companies that charge thumping rates of interest for the privilege of borrowing relatively small amounts of cash for just a few weeks or months.  They’ve even devised innocuous-sounding names for their services such as Payday Loans or Logbook Loans. The fact is, these are serious money-making machines that many people feel are on the very edge of what is acceptable in lending to vulnerable people at annual percentage interest rates (APRs) that can run as high as 4,000 per cent or more. The mainstream lenders have ‘done a runner’ and what little lending they do is often on a ‘fair weather friend’ basis.  In other words, they’ll only lend you an umbrella when the sun is shining. On this basis, it’s true that the ‘new lenders’ are performing a public service, but where else can the public go when their finances are tight, maybe someone in the family has lost his job, and they’re confronted with a financial emergency such as a broken TV or washing machine, dental bills or a leaking roof.   Is it ethical business? One of the ethical dilemmas that surround... Read more...

The Slings and Arrows of Outrageous Lending

Sub-prime money lending in the UK is alive and well.  Demand for Payday Loans, Logbook Loans and Guarantor Loans is soaring.  And with the country’s recessionary phase now into its fourth year, these high-interest short-term loans that were previously only popular with the sub-prime sector are now being taken up by so-called ‘Middle England’. In many cases, this group of newly-stretched individuals is also resorting to more ‘respectable’ sources of personal credit such as P2P Lending (aka Peer-to-Peer or Person-To-Person Lending), pawnbrokers and pre-paid credit cards.  For the more prudent, there are always old standbys such as Credit Unions. What’s going on in our economy that’s driving so many people into the arms of ridiculously expensive lenders and online opportunists who are charging outrageously high interest rates of up to 4,000 per cent APR in the case of Payday Loans? Let’s take a closer look at the type of credit we’re talking about: Payday Loans The bête noir of the sub-prime stable, these online loans are surrounded by controversy, largely on account of their sky-high annual interest rates (APR). Although Payday Loan companies were originally given a green-light by the Office of Fair Trading, a rash of recent complaints about their aggressive chasing of defaulters has led to closer scrutiny of vetting procedures and in some cases the withdrawal of their licences to trade.  Logbook Loans On the face of it, a short-term loan using your car as security seems like an OK kind of idea. You hand over your V5 Registration Document (formerly known as a ‘log book’) for the duration of your loan.  When you’ve paid it... Read more...

Reach For The Sky All You Payday Loan Arrangers!

If you watch daytime TV, you’ll know all about Payday Loans from the deluge of advertisements that target what – it must be assumed – is a vulnerable yet receptive segment of the UK population. Presumably, the TV researchers in ad agencies have delved into the socio-economic profiles of those who watch The Jeremy Kyle Show and other successful daytime TV programmes. So, are Payday Loan companies exploiting the unemployed and the under-employed, the sick and the vulnerable who are busy watching TV – and not busy earning a living?  This is an interesting question of our time, and one that is reflective of the way the financial system in the UK has gone awry. An often-cited justification for the existence of Payday Loan companies is that they’re providing a service that is not now available from high street banks.  It’s a fair point.  After all, anyone who reads the Sunday ‘heavies’ will know that Sir Mervyn King’s attempt at spreading financial largesse throughout the small-business-owning and mortgage-seeking sectors has hit the buffers.  We’ve now been told that the billions of pounds intended to boost the economy is slushing around in bank vaults or propping up their balance sheets. Either way, it seems harsh that those who choose to borrow from the perfectly legal Payday Loan people are castigated and stigmatised.  Ironically, some big bank mortgage lenders are said to be highly circumspect when it comes to ‘granting’ a mortgage to anyone who’s taken out a Payday Loan.  They say that this kind of ‘behaviour’ is a sign of ‘financial stress’. It’s also a sign of just how out... Read more...