Background
Summary of Council decision:
Three issues were investigated, of which two were Upheld and one was Not upheld.
Ad description
A poster ad and a beer mat for a student loan company:
a. The poster ad showed an image of a young woman with her eyes closed and mouth open, as if she was screaming. Text stated "We Know Student Money". Further text stated "When we were at Uni, we weren't happy with how short term loans worked, so we created our own version, Smart-pig.com lets you borrow up to £350 until your next Student loan payment, Win a Term's Rent Every customer is entered into our competition to win a term's rent up to £3500 Grace Period Get 10 days without incurring extra fees if your payment is delayed … Manageable limits Borrow up to £350 until your next Student Loan. Pay back early, extend and even top up your loan …Visit www.smart-pig.com …Trusted by over 20,000 students". Small print stated "Late repayment can cause you serious money problems. For help, go to: moneyadviceservice.org.uk". Further small print stated "Terms and conditions apply. Subject to status. 18 years and over".
b. The beer mat showed an image of a pint of beer and stated "Borrowing Doesn't Need to Taste Bad … Grace Period Get 10 days without incurring extra fees if your payment is delayed By Students When we were at Uni, we weren't happy with how short term loans worked, so we created our own version … Safety Net You'll never owe more than a fixed percentage of what you originally borrowed. Manageable limits Borrow up to £350 until your next Student Loan. Pay back early, extend and even top up your loan". Small print stated "Terms and conditions apply. Subject to status. 18 years and over". Text on the back stated "As Well as Short Loans You Can…Win a Term's Rent ... up to £3500 …We Know Student Money". Small print stated "Late repayment can cause you serious money problems. For help, go to: moneyadviceservice.org.uk".
Issue
1. MoneySavingExpert.com and four members of the public challenged whether the use of a prize promotion to win a term's rent as an incentive to take out a loan was irresponsible.
2. MoneySavingExpert.com and three members of the public challenged whether ad (a) irresponsibly targeted students, who were likely to be managing debt already.
3. One member of the public challenged whether ad (b) irresponsibly targeted students, who were likely to be managing debt already.
Response
FCL Consumer Finance Ltd (t/a Smart-Pig.com) said the product aimed to help students support their studies in a responsible way with policies that aimed to prevent them from getting into financial difficulty. They said they offered their customers a ten-day grace period where they would not be charged for late payment, and in over 92% of cases the late fee was removed when the loan was repaid. They said they had a 50% interest cap, meaning students would never owe more than half of what they had borrowed. They did not provide loans above £350 and would not allow a customer to borrow more than a certain amount against their student loans, and other incomes, or allow customers to roll over their loans. They said they thoroughly examined customers' credit records and expenditure to ensure they could repay the amount they were seeking and, where they were unable to approve the loan, referred customers to the government money advice service.
1. They said every term they gave a term's rent to a randomly selected UK student who liked their Facebook page, explaining there was no requirement to be a Smart-Pig customer. The aim was to raise awareness of and promote the brand among the student community and they had promoted the competition on social media and other ads. They said, because of the terms of the competition, and the fact that customers did not have to take out a loan, they did not think the competition was a direct incentive to borrow. They said use of competitions to gain “likes” and “shares” on Facebook was commonly used throughout marketing, including by other short-term loan providers. They said the competition was free to enter.
2. & 3. Smart-pig.com said they did not believe targeting a loan product towards students was irresponsible. They said between 6% and 10% of students had tried to take out a short-term loan. They pointed out that most students were adults and, therefore, eligible for a wide range of consumer credit products in the UK. They said their customers were educated young adults and mature students from a diversity of backgrounds and universities. They said students were unlikely to be managing immediate debt because government-approved student loans were not deducted from their income until they were earning a certain amount annually. They said students generally had very straightforward incomes, expenditure and credit history in comparison with other customers.
Assessment
1. Upheld
The ASA acknowledged customers did not have to take out a short-term loan with Smart-Pig.com to enter the competition. However, we considered the text "Every customer is entered into our competition to win a term's rent up to £3500" in ad (a) would be interpreted to mean consumers were required to take out a loan in order to enter the competition. We considered the text "As Well as Short Loans You Can … Win a Term's Rent … up to £3500" in ad (b) also gave the impression that only consumers who had taken out a short-term loan were entered into the competition. We noted there was no information in the ads explaining that consumers could enter the competition without being a loan applicant. We considered offering a prize promotion to win a term's rent as part of a loan application could encourage those who might not have otherwise been considering taking out a short-term high interest loan to do so. Because of that, we concluded the ad was irresponsible.
On that point, the ads breached CAP Code (Edition 12) rule 1.3 1.3 Marketing communications must be prepared with a sense of responsibility to consumers and to society. (Responsible advertising).
2. Not upheld
We understood that the product was legally available to students. We noted the ad explained the terms of the loan, including the details about the limit on the amount an applicant could borrow and the ten-day grace period, and stated "Late repayment can cause you serious money problems". We considered the ad did not target students in an irresponsible way. Because of that, we concluded the ad did not breach the Code.
On that point, we investigated ad (a) under CAP Code (Edition 12) rule 1.3 1.3 Marketing communications must be prepared with a sense of responsibility to consumers and to society. (Responsible advertising), but did not find it in breach.
3. Upheld
We understood that the product was legally available to students. We noted ad (b) also explained the terms of the loan, including the details about the limit on the amount an applicant could borrow, information about the fixed percentage of interest and the ten-day grace period, and stated "Late repayment can cause you serious money problems". However, we considered that the image of a pint of beer made a clear connection between taking a short-term loan and drinking alcohol. We considered that the overall impression from the ad would relate the short-term high-interest loan with purchasing alcohol. Because of that, we concluded the ad was irresponsible.
On that point, ad (b) breached CAP Code (Edition 12) rule 1.3 1.3 Marketing communications must be prepared with a sense of responsibility to consumers and to society. (Responsible advertising).
Action
The ads must not appear in their current form. We told Smart-Pig.com to ensure prize promotions were not irresponsible in their presentation and that ads did not target students in an irresponsible way.
