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Payday Loan Companies to face new Advertising restrictions

Companies’ which provide consumers with ‘payday loans’ are to face new restrictions on advertising their service, after fears that consumers are being harmed by serious problems in this sector.

New rules will also come into effect related the sharing of information and data of applicants, forcing payday loan companies to communicate with each other in order to stop applicants taking out multiple loans.

Payday loan companies have gained popularity since the economic downturn, and have prospered hugely from consumers who are desperate for a short term cash solution. The problem is that they charge extortionate rates of interest, plunging borrowers further into debt when they fail to make a payment.

Some of the more successful companies have taken to advertising on television, while football clubs such as Newcastle United and Blackpool have signed expensive sponsorship deals with

This exposure though is the subject of much controversy, and the government is expected to come together with the Advertising Standards Authority to introduce new rules which will limit the number of TV adverts lenders are allowed to air, as well as the times of day they can show adverts. It is likely lenders will also have to show more ‘realistic’ interest rates on their advertising, making it clearer to consumers what they will actually pay back.

Forcing lenders to speak to each other about loan applicants is another initiative, and it is hoped this will prevent one person taking out more than one loan at one time. Often when a person is unable to pay back a loan, they will take out another loan to pay off the balance. However this can easily transpire into a downwards spiral, in which the borrower falls further into debt.

If you have taken out a payday loan and are struggling with debt, or for any other queries related to this article, please contact one of our advisors who will be happy to help

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