Payroll news

Finance firms target students for pay-day lending 15.11.2009 There is uproar within the pay-day lender industry after some lending companies launched a product and targeted a campaign at students who have been affected by the student loans debacle. An estimated 70,000 students are yet to receive their loans and are being forced to seek finance from other sources. Lender companies such as Tooth Fairy offer loans, but at rates that have attracted fierce criticism. The company has been forced to re-design its website because its payment scheme wasn’t clear, following a complaint by Credit Action. The charity is also concerned about the way in which the company is targeting students who typically would not have means with which to pay back the loan immediately or with ease. The finance company allows them to borrow up to £300 paying back interest of £27 per week which they can apply for via a simple SMS on their phone. Although the companies are legal, and they do not market themselves as pay-day lenders. Other suppliers in the pay-day lending community are, according to Chris Tapp, director of the organisation Credit Action, ‘appalled and unhappy’ about the situation. Mr Tapp told Payroll World: ‘Pay-day lenders tell me they do not want to be associated with this product’, adding: ‘the product is indefensible’. He explained that there are a number of options open to students which should be exploited in the first instance, such as ‘approaching their university finance offices for bursaries, their banks for overdrafts and getting in touch with Credit Action itself who can offer advice and support in the difficult times’. According to Mr Tapp, the amount of time that people take to clear the original debt with Tooth Fairy is far longer than they originally anticipate. He was speaking to Payroll World the day after he appeared on BBC Breakfast News alongside Tooth Fairy’s Oliver Holt. Following the broadcast, presenter Bill Turnbull asked Mr Holt: ‘How long do people borrow for on average?’ He responded: ‘People intend to borrow for two-four weeks but the average customer takes six weeks to pay the loan back.’ Payroll World contacted Tooth Fairy but it declined to comment formally. Mr Holt said: ‘We are not pay-day lenders; payroll information is not used as security.’