Credit ‘curfews’ needed to protect vulnerable consumers from online ‘debt pushers’, say researchers

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RESEARCHERS from Newcastle University are calling for a ‘curfew’ banning access to online credit to help protect consumers from being sucked into a spiral of unsustainable debt.

Their report funded by the Economic & Social Research Council (ESRC) – Digital Credit, Mobile Devices and Indebtednessclaims that ‘digital’ credit services are fuelling borrowing and spending on impulse.

Consumers are led into a false sense of security by sites designed to make them feel they are in control, it is claimed, and this encourages them to borrow more than they can pay back.

Now the researchers are calling for a ban on accessing online credit between 11pm and 7am to protect consumers, claiming these are the peak hours during which payday loans are taken out.

It’s very much a problem of today’s 24-hour online culture, according to the study. The report’s findings are based on in-depth interviews with people using payday lending – or high cost short term credit (HCSTC) – services via apps or the internet. Easy access from smartphones, tablets or other devices any time of day or night encourages this problematic behaviour.

Dr James Ash
Dr James Ash, Department of Media, Culture & Heritage, Newcastle University

“Urgent reforms are needed to protect consumers from financial and psychological risks,” says lead researcher Dr James Ash from the university’s Department of Media, Culture & Heritage.

“The shift online has increased availability of payday loans to people previously excluded by mainstream lenders. But our research shows that digital access to credit only offers quick fixes – it doesn’t address borrowing’s root cause.

“Twenty-four-hour access to credit from any device is leading to unsustainable borrowing. This can contribute to long-term personal and financial hardship, and mental health problems.”

The cash and payday loan market has grown rapidly in the past five years. Regulators have introduced credit limits but not addressed the impact of online services directly, so Ash and colleagues from Newcastle and Durham universities, set out to establish how the rise in digital access to loans is changing borrowing practices among consumers.

The researchers also investigated how credit websites are designed, and their influence on how customers make decisions.

The findings are based on in-depth interviews with 40 people using payday loans, as well as with debt organisations. A total of 30 digital borrowing websites were also analysed, and interviews conducted with their designers.

The Newcastle University report highlights how some sites designs can speed up lending. Minimum and maximum loan amounts are shown using sliding bars, with interviewees saying these design features legitimise their borrowing. The bars make the amount they want to borrow appear reasonable, which Ash says “trivialises” decision-making around borrowing.

Anonymity and privacy are also key in the appeal of accessing credit digitally. Some interviewees said they did not have to explain themselves or face being judged – or rejected – by a real person.

However, a downside of obtaining credit this way was that loan providers target customers with messages through mobile devices. The report found this contributed to mental health issues because consumers cannot “get away” from their debt.

Digital Credit, Mobile Devices and Indebtedness urges regulators and policymakers to prohibit loan companies from pursuing existing customers by text and email to take out more credit.

Also, customers who fail to complete an application process should not be harassed, says the report. Other recommendations include measures to slow down customers from making hasty decisions. These include automatic prompts on the final application page to encourage them to reflect before submitting their form.

Ash says the findings also relate to wider issues around digital access to all types of consumer credit. “This is especially the case as traditional payday loan products are now changing into longer-term instalment loans,” he adds.



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