A TV ad for Everyday Loans, seen on 21 November 2022, began with a woman asking “Do you need to borrow money for home improvements, a car or paying off debts? But have you struggled with credit in the past? Then you've come to the right place. Everyday Loans. Just tell us how much you want to borrow — up to £15,000. We can give you a conditional decision in minutes … So, whatever your credit record, apply now at everyday-loans.co.uk. Representative APR 99.9%”.
The complainant challenged whether the ad was irresponsible because it encouraged the use of a loan to pay off debt.
Everyday Lending Ltd t/a Everyday Loans explained that the loan on offer could be used as a “consolidation loan” used to pay off pre-existing debts with other lenders, which was a common financial product offered by numerous Financial Conduct Authority (FCA) regulated lenders. They explained that such loans could be used by consumers to payoff multiple smaller loans borrowed from numerous lenders - simplifying their level of administration; and that it could be used to service a debt that had been taken out with a higher interest rate - reducing the cost of their outstanding borrowing. They said that the loan they were offering, which had an Annual Percentage Rate (APR) of 99.9% was not inherently irresponsible, as it could fulfil these criteria.
Everyday Loans said the ad had not suggested the loan could be used to make non-essential purchases. They said the voiceover indicated the loan could be used for home improvements or the purchase of a car – in their view both of those uses for a loan could be responsible if needed urgently. They said the ad had avoided suggesting frivolous, non-essential uses for the loan, such as holidays or shopping trips. They said future versions of the ad would include further information about when a debt consolidation loan might be appropriate.
Clearcast said that the ad had been in circulation since March 2020. In their view, the ad highlighted a range of different uses for the advertised loan, including consolidating debts, none of which could be considered frivolous. Furthermore, the ad’s calls to action were targeted at a specific market - those who had previously experienced credit difficulties. They said that loans and other financial products in the market could be in excess of the 99.9% APR that Everyday Loans offered. They said the ad had not encouraged consumers to get into further debt, but offered the possibility to consolidate a range of debts into a single manageable one. In their view, when Everyday Loan’s target market was considered, that could lead to a more affordable debt repayment plan.
The ASA understood the product advertised could be used as a debt consolidation loan, which would combine an individual’s existing debts into one loan. Such loans could minimise an individual’s administration of their debts, and in some circumstances could lower the monthly payments of those debts. We also understood the loans could be beneficial where the level of interest paid was lower than that of the debts consolidated, but that it was generally advisable for those thinking of taking out a consolidation loan as a way of managing their debts to seek free debt advice before doing so. Consolidation loans were likely to be less appropriate in situations where consumers ended up paying more overall than the pre-existing debt, or where debt advice, rather than taking out a new loan, was necessary.
The ad stated that consumers who had previously encountered difficulty accessing credit could pay off existing debt with the advertised loan – which had an APR of 99.9%, as stated in the superimposed text. We considered the ad was targeted at those who may have had pre-existing debts, or who had struggled accessing credit because of a poor credit score. We noted the APR of the loan was 0.1% lower than that of a high-cost short-term loan, and considered that if the interest rate was lower than a consumer’s current rate of interest, they likely owed money to a high-cost short-term lender, making them particularly vulnerable.
Aside from the superimposed text, no further information about using a debt consolidation loan as a way of managing existing debts was provided in the ad. For example, that it was advisable to seek free debt advice before applying for such a loan; that the loans were only appropriate in certain circumstances; or that the loan could be more expensive in the long term. We considered the ad presented the loan as a convenient and inconsequential way of dealing with debt, and that the claim consumers would receive a “conditional decision in minutes” contributed to that impression. We considered that the ad encouraged consumers to use a loan to pay off a debt without providing further context about the circumstances in which that may be advisable or information about the risks of doing so and therefore concluded it was irresponsible.
The ad breached BCAP Code rule 1.2 (Compliance).
The ad must not be broadcast again in the form complained of. We told Everyday Lending Ltd t/a Everyday Loans to ensure that they did not encourage the use of a debt consolidation loan to manage existing debt without stating the risks of doing so.