Payday loan companies like BrightHouse and Amigo Loans among many others are in the spotlight for offering their customers monetary incentives for recommendations. As the rules and regulations surrounding marketing payday loans tighten, some payday loan companies in the UK are resulting to using what many may consider to be unethical marketing practices.
The latest consumer watchdog reports show that some payday loan companies are offering their customers up to £1,000 if they successfully convince their friends and family members to take high-interest loans. Lenders such as BrightHouse are on the spot for offering £220 to customers who introduce their family members and friends successfully. Consumer watchdogs have termed this incentive ”cynical”. Amigo customers are earning up to £1,000 for making their friends and family members take out £10,000 loans which attract a 50% annual interest rate. BrightHouse which is a popular rent-to-own retailer is offering £220 to customers who convince their friends to take out loans attracting interest rates up to 99.9%.
There are many other lenders guilty of this seemingly unethical practice. Doorstep lender Provident is also paying its customers £30 for referral loans amounting to £100 or more at 535% interest. Loan At Home hasn’t been left behind. The lender is offering £20 or more to customers who promote loans attracting a 433% interest. What’s interesting is; the lenders see nothing wrong with their incentives. When contacted, Loan At Home claims they are happy to offer a ”small” reward to customers who promote them. BrightHouse claims its actions are common among retailers. Amigo is on record insisting their marketing strategy targets a small percentage of loans. Consumer watchdogs are of a contrary opinion. According to Marc Gander, a Consumer Action Group Administrator and Adviser, ”the schemes are bound to attract many people.” Martyn James from resolver.co.uk shares similar sentiments. James sees serious ethics concerns about the payday loan marketing schemes. His sentiments have been repeated by many other consumer watchdogs as well as individuals who are concerned about increasing debt levels in the UK. According to the latest Bank of England statistics, UK households have accumulated unsecured debt amounting to £204billion.
When should you take out a payday loan?
The recent developments have brought into question the circumstances that warrant taking a loan. Although unethical, these schemes may very well be legal exposing many vulnerable borrowers to debt problems. So, how should you protect yourself? The first most important step is understanding when you are supposed to take out a payday loan or any other loan. Never take a loan just because it is available. You need a better reason! For instance, payday loans should be taken by people who have emergency cash needs. If your car has broken down mid-month and you don’t have money for repairs, you can take out a payday loan. Payday loans can also cater for emergency medical expenses among other unexpected monthly expenses as you wait for your salary. If you don’t have any pressing emergency cash need, don’t take out a loan even if it is available to you instantly.
Short term loans spanning for a few months to one year should be taken for reasons such as starting a business. There is a general rule that states you should never use loans to acquire liabilities. A car is a liability if you don’t use it to earn you money. Clothes, shoes, electronics, and furniture are also liabilities in this regard because they don’t earn you any money and they lose value with time. It’s also important to take out loans from responsible lenders only. Responsible short term loan lenders in the UK don’t use unethical loan promotional techniques to lure innocent borrowers into debt. They care about their customers as much as they care about profits.
Reputable payday loan lenders in the UK are registered by the FCA. You can search the FCA’s register (https://register.fca.org.uk/) to ascertain the firm you are dealing with is authorised. Furthermore, authorised firms don’t charge exorbitant fees. It is worth noting the FCA has regulated payday loans tightly in the UK due to past incidences of borrower exploitation. The regulator is in the process of extending its reach to other types of loans. Before there is adequate regulation on all types of loans available in the UK, it is important for borrowers to seek loans for the right reasons and stick to borrowing from reputable lenders and brokers like SwiftMoney.
Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.