The Office of Fair Trading has today released guidance for payday loan companies who mislead customers by suggesting they are a Government body or charity, with words such as helpline and debtline being used in marketing materials.
The OFT says firms confusing consumers about their commercial nature are in breach of the rules and regulations. Often trading names can imply that a service is free or impartial and ultimately dupe the consumer into believing they are not receiving help from a commercial organisation. Consequently the OFT has been forced to release updated guidance on fair and transparent business practices for the payday loan sector. Trading names which do not meet the necessary regulations outlined by the OFT will be refused for new licence applications. When existing licences are renewed misleading trading names will have to be removed.
"Cheap Loans for all"
The growing demand for payday loans has meant an increased number of consumers are at risk of being misled by false or inaccurate advertising. One of the largest payday loan companies is currently spending £16 million advertising their payday loan services and the number of people using short term credit is on the rise.
The latest guidance update from the Government watchdog has said that advertising which suggests everybody can receive a 'cheap loan' regardless of an individual's financial record will not be tolerated. Consumer credit licence holders run the risk of losing their consumer credit licence if they do not follow the guidance outlined by the OFT.
One final update released from the OFT is that advertising which suggests exclusivity to a product or to be able to provide a service in a specific location is inappropriate, unless this can be proven.
It's sensible to expect consumers to be protected when purchasing credit, as such at Debt Support Trust we welcome the changes brought about by the OFT. It's essential that all financial organisations are transparent, including payday loan companies.