Payday lenders buying personal details at £60 a head

Recently I spoke at a meeting where I asked those in attendance to raise their hands if they had had experience of a text message or an email from a payday lender offering them an expensive loan at interest rates that would make most people weep.

Recently I spoke at a meeting where I asked those in attendance to raise their hands if they had had experience of a text message or an email from a payday lender offering them an expensive loan at interest rates that would make most people weep.

The vast majority of the room raised their hands.

I was also told recently that the average price that a firm will pay for a name and a phone number or email address for a prospective customer is £60. To repeat, payday lenders in the UK feel it is worth their money spending £60 per for the contact details of an individual.

To put that into some context, the next highest paying lead is from firms selling traditional mortgages and loans who pay between £20 and £30.

A growing industry

The payday lending industry has made some enviable leaps in recent years. In 2004 the industry was worth a mere £100 million; in 2009 that figure shot up to £900 million. Now, in 2013, it is said to be worth in the region of £2.2 billion. This is a big profit-making industry.

In 2012 alone over 1.2 million people were in hock to a payday lending company and the volume of loans taken out were costed between £7.8 million and £8.2 million.

Many of the text messages that people receive, and the emails that litter their inboxs, come from loan brokers or dodgy debt management sites.

A report by the Information Commissioner’s Office in December 2011 revealed that 36 per cent of the 1,014 people it questioned received a text from a debt management company.

In the US it was realised some time ago what kind of problem it was that companies were buying up people’s details. The LA Times found that a company by the name of NeedRapidCash.com were sending out text messages advertising loans, and if an individual replied, that would in turn verify the lead, and the company would then go on to sell the information on to the loans company willing to put up the best price.

A survey of 4,584 people, carried out by the Money Saving Expert, found that ‘spam’ from a payday loans company was one of the most popular types they received through on their phones, along with PPI claims and accident compensation.

In their post they recommend not only that people ignore the text message, but also that people also report the information to the Information Commissioner (ICO).

Legal confusion

The problem is twofold: that payday lenders, and brokers that work on behalf of them, are carrying out these types of sales techniques and that buying data is too much of a legal grey area.

On the first issue the Office for Fair Trading are working to monitor the practices of payday lenders. This regards collection practices and the information they are up front with, which is in response to widespread bad practice in the industry. But there is nothing written by the OFT to suggest they will be looking at the way in which lenders gain custom through email and SMS. There is also nothing to suggest they should temper these practices.

On the second issue, regarding data purchasing, it is illegal to sell stolen databases but there is a legal grey area around the position of anybody who buys them. Indeed the tax lawyer Jonathan Fisher said in the Tax Journal in July 2012 that around this there is “considerable uncertainty in English law”.

The way the regulators are carrying out investigations into how payday lenders treat their existing client base should also look into the practice of customer acquisition. After all, don’t we want to know how these dubious companies have our details in the first place?

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