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Payday loan uses revealed amid calls to ban advert

Payday loan uses revealed amid calls to ban advert

Category: Loans

Updated: 30/12/2013
First Published: 30/12/2013

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Research conducted by think tank IPPR has revealed the most popular uses for payday loans, finding that everyday expenses come out on top – and not unexpected emergencies such as boiler repairs.

The figures show that more than two in five borrowers – or 41% – use payday loans for everyday expenses such as groceries while almost a third (32%) use the cash to pay for utility bills, and a worrying 22% even used it to fund this year's Christmas spend.

In fact, some younger people were even found to use payday loans to fund a night out or pay a mobile phone bill – not the contingency plan that these loans were thought to be used for.

It's a worrying trend and signals that these loans aren't just used to help plug the gap after an expensive month but that many payday loan users have significant and recurring difficulties making ends meet, and that's led the think tank to urge financial institutions to offer alternatives that are both accessible and flexible.

"We need better alternatives for borrowers that provide more options when it comes to the length of loan and repayment options and affordability… gradual repayment methods that don't come with a Scrooge-sized price tag need to be available," said Mathew Lawrence of the IPPR.

The research was released amid yet more ongoing controversy surrounding the payday loans industry, this time with a committee of MPs calling for payday loan adverts to be banned on children's programming.

There's a concern that viewing such adverts from a young age could lead children to believe that payday loans are an easy, harmless and appropriate way to access finance, and with figures from Ofcom revealing that children between the ages of 4 and 15 saw 596 million payday loan adverts in 2012 – the equivalent of 70 per child – it could be a growing problem.

There have already been calls for payday loan adverts to be banned on children's TV channels, something that a lot of responsible lenders have taken on board, but campaigners are urging for it to involve daytime TV too.

The Advertising Standards Agency already bans payday loan adverts that are deemed to be "irresponsible", but says that legislation would need to be brought forward for an outright ban on children's programming to take place.

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