Universities Ban Payday Loans Lenders Targeting Students After NUS Campaign

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Universities have banned Payday Loans Lenders | PA

Payday loans lenders have been banned from advertising at three UK universities for exploiting "vulnerable" students, after some were found to have interest rates of more than 4000%.

The University of Northampton, Northumbria University and Swansea University have all committed to prohibiting adverts from companies calling the lenders "hugely irresponsible" for targeting students struggling with financial debt.

The decision is the result of a lengthy drive by the National Union of Students to hold payday lenders to account, after research revealed as much as 10% of students in vulnerable groups have accessed high risk debt, with many starving themselves to save money. Payday loans adverts are already banned at the University of East London, who said it wanted to prevent students becoming "financially destitute or desperate" through taking out high-interest debts.

Pete Mercer, NUS vice-president (welfare), encouraged other institutions to follow suit. "Students are struggling to make ends meet and this is having a real impact on their well-being and their education," he said on Monday. "It's clear that at least some payday lenders are targeting vulnerable students and the government has so far failed to act so it’s important we do everything we can to limit their ability to reach our campuses.

"For example, three times as many students with caring responsibilities use payday loans as other students. It's great that these institutions have already joined our campaign and I hope that others will soon follow suit."

According to the NUS, 3% of college and university students have taken out high risk debt, which includes doorstep loans, payday loans and cheque cashers, rising to 6% of over 21-year-olds and 10% of students who are parents. Students who are carers for dependent adults are three times more likely to take out a high-risk debt.

Recent research by the student body revealed two thirds of students in further education are not able to concentrate on their studies due to financial concerns, with half of all undergraduates "regularly" worrying about meeting the cost of basic living expenses. Some payday lenders have a rate of more than 4000% APR, while nearly one third of loans are rolled over at least once, meaning many students will pay for their original loan several times over.

In a 2012 interview with HuffPost UK, Mercer condemned payday lenders as "unethical and irresponsible" for telling students not to approach their universities for funding. Earlier that year, payday lender Smart Pig hit out at the NUS for targeting the company, saying the student body was "out to get us".

Tom Parks, founder of Smart Pig, told HuffPost UK: "The NUS campaign is largely symbolic as to the best of our knowledge, no lenders currently target students on campus (apart from our own trial) and we have never advertised on the campuses mentioned. Even if they did, short-term loan advertising is everywhere -students already know where they can go to apply for a short term loan online.

"We agree with the general concerns regarding short term lending practice in the UK, which is why we are leading change.

"We are giving the 10% of students who find short term loans useful - many of the whom are NUS members - a loan product that is tied with the student loan cycle and is genuinely the most sympathetic and suitable product in the available.

"Although we don't currently advertise on campus, we urgently need to spread the word that there is a better, more sympathetic student-run alternative to traditional payday lenders - very difficult considering the huge marketing budgets of the companies we are going up against."

Wonga has previously publicly apologised for directly aiming its loans to students, after the company posted an advert on its site which read:

"A student loan is fine to help you pay for your university and living costs, but what about those times when you're waiting on money to come in and you need to buy or pay for something unexpected now?

"There's a totally new way of borrowing money to see you through until your next cheque and it's called Wonga.

Swansea University's registrar and its student union welfare officer released a joint statement on the decision condemning payday lenders as "hugely irresponsible".

"We are becoming increasingly concerned about payday loans lenders targeting students," the statement read. "These lenders or legal loan sharks as they’ve been dubbed lend money over short periods of time at extremely high interest rates, often via the internet.

"In the last few years, with the recession biting more and more lenders have come on the market targeting certain members of society and in particular some of the most vulnerable student groups. We know that some of these lenders make misleading or inaccurate claims about other support available, which is hugely irresponsible."

The Office of Fair Trading recently criticised payday lenders' websites, warning "most" contained misleading information - however the regulator came under fire for its "timid" approach to the controversial companies.

Northumbria University’s vice-chancellor Professor Andrew Wathey, who is also chair of the Student Loans Company stakeholder forum, said the institution took its responsibility for student welfare "seriously".

"We support the NUS campaign to take action against advertising by these loan companies. Their adverts are often misleading and their high interest rates can leave vulnerable borrowers in difficulty.

“All universities offer financial support packages including bursaries, scholarships and grants," he added. "I would encourage any student requiring financial advice to speak to their University’s student welfare team in the first instance.”

Visit the NUS' money section for advice on money and debt.

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