Warning over 'same day' sky-high loan ads of up to 1,721% flooding Facebook
6th May 2022

HARD-UP Brits are being targeted with misleading adverts for loans with sky-high interest rates on social media.

An investigation by The Sun found sponsored posts on Facebook promoting loans with eye-watering rates as high as 1,721%.


Several promised cash within minutes or on the same day and some did not display the potential sky-high rates until reading the small print.

The adverts appeared on our Facebook feed after using search terms on the popular platform like Universal Credit, debt help and borrow money.

Adverts must include representative APRs and specific risk warnings about late payments and link to the government's Moneyhelper website.

And credit brokers must state they are brokers and not lenders, among other rules for financial firms.

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One ad for Little Loans, a credit broker, promised "cash can be sent in 15 minutes" and borrowing of between £100 to £10,000 with a representative APR of 49.9%.

After clicking through, small print on the page reveals that rates are between 11.8% APR and a maximum of 1,721%.

It says it compares 30 lenders to give you "the lowest APR possible" and it will be based on your personal circumstances.

APR stands for annual percentage rate and is used to calculate the amount of interest you'll pay on top of paying back the original amount you borrowed.

Borrowing £100 for 12 months with the highest rate of interest would mean repaying £143.42a month, costing you £1,721.04 in total.

That's interest of £1,621.04 – 16 times the amount borrowed.

Another advert for Fund Ourselves promised "get money in your account today" but did not say how much you could borrow or what interest rate you would pay.

After clicking through new customers are told they can apply for an "instant short-term affordable loan" of up to £800 for new customers or £1,500 if you've borrowed before.

But the representative APR is 505.7%.

Representative APR means that at least 51% of customers get that advertised rate if accepted for a loan.

Borrowing just £100 for 12 months would cost £42.77 in monthly repayments and you would pay back £513.25 in total.

You would pay interest alone of £413.25, more than four times the original loan amount.

Another advert for Drafty offers loans of up to £3,000 with a representative APR of 89.7%.

Borrowing £100 for 12 months would cost £12.91 in monthly repayments adding up to £154.93 in total and interest alone would cost £154.93.


High cost credit dangers

High cost credit is where rates and other costs are far higher than standard borrowing agreements.

In recent years the City watchdog has cracked down on high cost credit, including doorstep lending, rent-to-own, overdrafts and payday lending.

It follows The Sun's Stop The Credit Rip-Off campaign to help the millions of families who fall prey to doorstep and legal high street loan sharks.

A report from the Financial Conduct Authority (FCA) in 2019 found that nearly 3million people use high cost credit.

Many are on low incomes and have low credit scores and are excluded from mainstream lending.

It means that those who can least afford it are paying more to borrow and it's often for unexpected emergencies and shortfalls.

It comes as millions of households face rocketing living costs from higher energy bills to pricier food on supermarket shelves.

And there are fears that many struggling to get by will have to borrow money to cover everyday costs.

Borrowing on credit cards hit £1.5billion in February, the biggest rise since Bank of England records began in 1993.

And borrowing is set to hit a five-year high this year, according to EY Item Club, as millions of families struggle to make ends meet.

Sue Anderson at debt charity Stepchange said that at a time when so many people are struggling, it was hard to justify this type of marketing "which is clearly aimed at people likely to be in financial difficulty".

She said: "Promoting speed and ease of access to high-cost credit trivialises it, and risks causing hasty decision-making that makes financial difficulty worse.

“Customers need time to consider borrowing, not a design that rushes them into a decision that could leave them even further in debt.

"Those with low financial resilience are most likely to use high-cost credit products, not by choice but due to a total lack of borrowing alternatives.

"The lending in these ads might be regulated, but the sky-high APRs illustrate a terribly high risk of harm.

“Repeated use of these kinds of products to make ends meet – often the reason people turn to this kind of borrowing – can trap people in a spiral it’s very difficult to get out of, even more so if they’re already on a low income.

" Sadly, with the cost-of-living crisis set to escalate further in the coming months, there’s every chance we will see a rise in the number of people forced to turn to this kind of borrowing just to get by.”

James Daley, the founder of consumer website Fairer Finance said it was "shocking" that lenders were targeting those who are on benefits.

He said: "These are vulnerable customers who are highly unlikely to be suitable for new credit deals – and it’s hard to see how this kind of targeting would be in line with FCA rules.

"Credit is not always bad – but it’s unlikely to be the solution for people who are already struggling and firms need to be very careful about how they advertise.

"Lenders often overstep by focusing on how quick the money will be in your account or by focusing on how easy it is to apply.  

"Some of the interest rates on offer are eye watering, and don’t appear to be consistent with the cap imposed by regulators several years ago.

"It’s important the FCA looks into this as a matter of urgency."

After we highlighted the ads to Facebook said it has removed the adverts for violating its guidelines.

In its advertising policies, the social network says: "Ads may not promote payday loans, payslip advances, bail bonds or any short-term loans intended to cover someone's expenses until their next payday. Short-term loan refers to a loan of 90 days or less."

The FCA has since written to 28,000 lenders and brokers warning them not to use misleading terms in their advertising.

Sheldon Mills, executive director of consumers and competition at the watchdog, said:

"The rising cost of living means many more consumers may find themselves in difficulty.

"When people are looking for a loan, it’s vital that they have the full picture about what this might mean and the risks involved – particularly if they are already in a difficult financial situation.

"There is no excuse for adverts to make borrowing look easier or less risky than it is and they should be seeking to help customers through the cost of living crisis – not exploiting it in their marketing."

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A spokesperson for Digitonomy, the company behind Little Loans, said: "If you use the Facebook search function for ‘borrow money’, it is more than likely that Facebook will then choose to show you adverts relevant for your ‘borrow money’ search possibly including money comparison sites such as the Little Loans who won a Platinum 5 star rating from customer feedback site Feefo in 2022"

Fund Ourselves and Drafty did not respond to requests for comment.

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