James Daley

By James Daley

Borrowing money is a necessary evil in today's society. Most of us who own a home would not have been able to do it without the help of the bank. And when the unexpected happens, loans can also be a vital lifeline.

But credit, when abused, is also lethal - which is why the payday loan industry has come in for such a beating over the past two years. As the less scrupulous lenders know too well - the irresponsible and easy way to sell loans is to remind people that they are the key to instant gratification. Want a luxury holiday? Why not borrow now and worry about the consequences later? Want a new car? Buy one today with a loan that will be in your account in minutes.

Thankfully, that kind of advertising is becoming less common - but it's not been eradicated entirely. And without some rules to govern it, I'm not sure it ever will be - lenders will always continue to test the boundaries.

Staying on the straight and narrow

This week I noticed that First Direct - which has a reputation for being the friendliest and most straightforward of banks - running an advert for its personal loans with word "Splurge" in large, bold print at the front and centre. Underneath, in smaller print it goes on to say "Sensibly...you'll have to make the repayments after all!".

Even with its disclaimer, an advert that encourages people to take out a loan to "splurge" is not exactly responsible. But if a bank like First Direct can't resist the temptation, what faith can we have in the rest of the banks to act responsibly?

When it comes to other dangerous products, the government's solution has simply been to ban advertising altogether. Cigarette advertising was banned over a decade ago in the UK, and soon tobacco companies won't even be able to put branding on their products. This might be a step too far for loans - but we should at least be restricting companies to advertising the rates and features of their loans - rather than allowing them to also try and tempt people to take one out.

I know this sounds prudish, and perhaps a little patronising. But taking out a loan is easy, while paying it back is not. I'm all in favour of a healthy, responsible lending market - it's a vital part of a healthy economy. But we need to remember that credit can also ruin lives.