Payday loan companies could be banned from advertising, the new financial regulator has warned.
Martin Wheatley, the chief executive of the new Financial Conduct Authority, said an advertising ban was one of the options it was considering as it prepared to take on the regulation of the industry from next April.
“Clearly that is an option that could be considered if it was felt the way that advertising was being used couldn’t be dealt with through any other measures short of that,” he said.
“I think there are lots of problems with advertising, that is one element that has been commented on, the targeting of young people, students, children in some cases.
“If payday loan companies are genuinely targeting a particular income bracket people with jobs why do they advertise on daytime television?”
Mr Wheatley was speaking following a summit of lenders, regulators, charities and ministers intended to address the deep-rooted problems in an industry which is accused of making loans to people which they cannot afford to repay and then saddling them with exorbitant rates of interest.
Treasury Minister Sajid Javid said the take over by the FCA would mark a “step change” in the regulation of the industry.
“They now have to deal with a regulator with some real teeth. They are going to feel the hand of the regulator on their shoulder and they better get used to it,” he added.
The OFT said some business models appeared to be based on customers taking out loans which they are forced to roll over because they cannot afford them. This then leaves the customer trapped with that firm.