A few months ago in the UK has been started an initiative aiming to forbid the TV advertising of payday loans. The request was at least to stop such ads until 9 PM with the main idea to limit the influence over the young people under 18. There were some studies, which discovered that teenagers are among those who are most possible to take a quick loan or to make someone else to do it for them.
Meanwhile, in Bulgaria have been some voices with a demand for complete ban on advertising of payday loans as a financing option. Such proposal could be heard even from the highest levels of bank management. The reason is that such ads target people without adequate financial knowledge and force them to take payday loans with the promise of easy money. This, according to the banking institutions leads to a drop in the trust in the banks in general, which damages the banking business and financial environment.
The lack of good legal framework allows companies, which offer payday loans to show these type loans as an easy solution and access to resources. At the same time, in the ads they don’t say anything about the amount of interest rates and penalty fees. Apart from that, studies made by the banking sector showed that the majority of people who applied and being approved for payday loans are young people who use this financial instrument to buy goods and services which are far from essential. This shows that they are definitely influenced by the media advertising, which leads to the initiative for stopping of payday loans ads or at least shifting their broadcast in a time zone, which is unpopular among the teenagers.
Whether the solution of the problem connected with payday loans is to ban their advertising or in creating a better legal framework of this type of financial services is debatable. The fact is that payday loans are a financial instrument that can be successfully used to solve certain financial problems. The fact is also that successful management of a payday loans happens only with people who have the needed financial knowledge to fully understand the pros and cons of such loans.
These people can make a reasoned decision about should they or should not take such loan. This itself shows that not the suspension of ads for payday loans is the solution to the problem, but an awareness campaign on the advantages and disadvantages of this type of loans. This is an initiative that certainly must be done as fast as possible.