Making Consumer Credit Markets Fairer

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The following report is a quick overview into the recent report on making consumer markets fairer - regarding payday loans. The research was conducted for BIS by Ipsos MORI Social Research Institute and we have summarized the golden nuggets to save you some time and keep you informed. If you would like to download and read the full report please feel free to download it using the link in the top right of this summary.

Background and methodology


The rapport starts off by giving the reader some insight as to why the BIS deemed it necessary to have this research done;

Payday loans have been increasingly popular and to keep the booming industry under control the BIS needed to know;

  • The advantages and disadvantages use of payday loans,
  • If payday loan advertising was presenting consumers with a balanced impression of the costs and risks associated with payday lending should they need access to credit?

BIS commissioned Ipsos MORI to conduct further research to explore the impact of advertising and communications by payday loan companies on existing and potential customers and on their behaviour.


Here at we commend the research done, but feel that more participants from across the entire UK would have given a more concise report as to the true state of affairs regarding the current situation of the payday loan market. To sum up the methodology - the research comprised two components and was conducted with people who had either considered taking out a payday loan in the past or was a previous or existing payday loan client from two locations, – London and Sheffield. Quotas set on payday loan use status, income, age and gender to access a range of customers who commonly apply for payday loans.

Four one-and-half-hour-long discussion groups, each with at least six and up to eight participants; and

Six hour-long face-to-face single depth interviews.

A mixed qualitative methods approach was used to make the most of the generative dynamic between participants inherent within the group discussions, but also to mitigate social desirability bias given the sensitivity of the research topic.

Participants gave their views from two distinct perspectives: as ‘citizens’, considering the wider context of payday lending on society as a whole, and as ‘consumers’, considering taking out a payday loan themselves, often experiencing ‘cognitive dissonance’ in doing so.

The 27 page rapport covered four main points in the results that we are going to look at and include the highlights of;

Why people were taking out payday loans and consumers’ general attitudes towards payday loans

  • - The most common use of payday loans was to meet urgent household needs.
  • - Participants typically reported it as a “last resort”; when they had no other credit options and they needed money critically at the time of taking out the loan.
  • - Those who were able to access alternative sources finance were less likely to take out payday loans. Friends and families were the most important source of alternative credit.
  • - Most participants who had taken out a payday loans felt bank loans were unsuitable for their needs due to being longer-term or more difficult to obtain than payday lending.

The advantages and disadvantages of payday lending

  • - The immediate access to finance, speed and ease of application and acceptance for loans that payday loans offered were of primary importance.
  • - The privacy and anonymity of online lenders was deemed an advantage.
  • - Payday loans offered independence and control over their finances to customers.
  • - Participants were aware that payday loans had a much higher interest rate than bank loans.
  • - Payday loans were considered a credit option for those who had no alternatives.

Views on payday lending advertising

  • - All participants had seen many different examples of payday loan advertising.
  • - Participants mentioned television adverts spontaneously, Wonga the most recalled due to the omnipresence of the brand.
  • - Payday lending advertisements were difficult to avoid as they frequented daytime television.
  • - Participants were generally very concerned about the effect of payday advertising on vulnerable people.
  • - With the exception of the brand leader, Wonga, there was very little to differentiate lenders from each other.
  • - A minority had seen adverts via email
  • - Consumers were disinclined to engage with information about the risk and costs of lending in advertising material.
  • - Adverts which disassociated payday lending with its negative connotations and sold the product to customers less aggressively were more successful with customers.
  • - Participants preferred to seek information about risks and costs of taking a loan on lenders’ websites. Their primary concern before taking a loan was to establish the relevant total cost of credit; websites which made this easy to do were strongly advocated.

Views on modifications to payday lending adverts

  • - There was a strongly-held view that modifications would be relevant to different types of people, and all or a combination of the messages would be necessary to use were such an approach to be taken.
  • - Participants were not advocates of the ‘wealth warning’ because the figures cited did not raise enough concern for them
  • - There a preference for the ‘wealth warning’ (“STOP! THINK! COULD YOU AFFORD TO PAY BACK THIS LOAN?”). Participants felt that the direct appeal to the reader/viewer was effective.
  • - It was important that modifications included a clear indication of the consequences of defaulting on loans and to think seriously about the affordability.
  • - Participants were generally very receptive to advice signposting modification (“Are you struggling to make ends meet at the end of each month? Call the Money Advice Service on 0300 500 5000 to get quick and easy debt advice).
  • - The ‘total cost of credit’ was the most widely-liked modification. They felt that this information was an appropriate way to explain the costs of the loan – less complex or intimidating than APR
  • - A few participants suggested that a ‘defaulting scenario’ could be incorporated into this modification.

While participants were positive about the modifications for most borrowers, they also tended to feel quite strongly that modifications to adverts alone may not be an adequate response to deter the most vulnerable from choosing payday lending.

Payday loans are here to stay and welcomes the findings of the BIS, as mentioned before a wider demographic survey would perhaps have been more relevant but the information was much needed in this time of transformation. We believe that it will help set the benchmark for future regulations to be determined in this increasingly popular industry.

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Writen By:

Jim Cook

Jim cook has been in the financial sector for over 10 years. Specialising in the payday loan sector.

Published in Research & Data

Data Protection Reg No: Z3508710 - Consumer Credit License Number: 655622