Online loan companies and brokers are using tawdry tactics to try and attract vulnerable customers – what can we do to make sure this doesn’t have terrible consequences?
by iona bain
New rules were ushered in this year to ensure that the term “independent financial adviser’ can only be used to describe someone with top qualifications and the ability to recommend all kinds of products to consumers. But what happens if we chop off the word ‘independent’? Well, just about anybody can pass themselves off as a ‘financial adviser’ – even promoters of quick fix loans that could do more harm than good.
I have come across a site called “Loans for Poor People”, which recently appeared on a forum for real financial advisers. The individual behind this firm calls himself a financial adviser on Linkedin and various blogging sites. It is not a joke, as far as I know, even though the website absurdly states that it is ‘designed for the deprived’.
I have never come across a more dehumanising name for a financial services outfit than “Loans for Poor People”.
What’s more, the Office of Fair Trading recently raised alarm bells over the damaging slogans used by the short-term loan sector, such as ‘no credit checks’ and ‘get cash ASAP’. I have seen some of this flippant language used by firms like LFPP on forums, and have reported my concerns to the watchdog. It is now looking into my complaint and assures me it is taking it very seriously, given that this firm does not appear to show up on its public register.
Stuart Carmichael at the Debt Support Trust agreed that this company’s title was exploitative. He said: “I was amazed to see the company is promoting loans for people in an IVA & bankruptcy. I’m not sure whether the people behind this are foolish and targeting the deprived or unethical and aware of the error they are making. As an intermediary, they will get paid when people take a loan from another company. Most people in a deprived situation will do anything for credit, so this company probably feel they can maximise their profits by targeting people in a desperate situation.”
The title suggests that people who are in a vulnerable position should self-identify as ‘poor’ or ‘deprived’, and that the magical cure-all for that desperate predicament is simply the right loan at the right interest rate. If such people really are in need of help, surely an ethical and responsible ‘financial adviser’ would seek to lay out all their options, including debt advice charities and the Citizens Advice Bureau. It is not clear whether an applicant for a loan on the site would receive such information.
Church Action on Poverty, a Christian social justice company in the UK, released a report earlier this year which highlighted the stigmatic terms attached to people in financial difficulty, and rightly argued that they deserved more compassion and better understanding.
Firms like LFPP are trying their utmost to promote products, which may be totally unsuitable for many consumers, under the auspices of financial advice. Thankfully, they will not always succeed, as many savvy consumers will not fall for it.
But history tells us that the public is not necessarily alive to false marketing, mis-selling and poor advice – far from it. And the number of young people who are going online for financial information cannot be underestimated. It’s a recipe for disaster.
LFPP says it is neither a broker nor a lender. Instead, it matches ‘poor’ customers to the most suitable loans on the market for, apparently, no fees. Mr Carmichael said that the firm is likely to be paid commission every time if refers somebody to their service. But it is a mystery as to which third party firms obtain your details from this ‘matching service’, whether they would be adequately regulated and what kind of costs will be involved during the process. After all, the terms and conditions page simply links to a different website where you can apply for a loan instantly.
Of course, it’s hard to see what the regulators could do about the uncontrollable jungle that is the internet. But if you have doubts about a firm, you can call the Office of Fair Trading consumer helpline. You can also search its public registry to see if a firm has a consumer credit license. You can report firms on social media sites who use demeaning terms to describe certain sections of society. You are, by no means, powerless.