Payday loans 'service' aimed at children launches
A payday loans service for children called Pocket Money Loans has launched, targeting kids aged 3+ with loans of up to £20.
The loans come with an APR of 5,000% and are available instantly online. Borrowers can choose to repay their loan in as little as a day or can take as long as 60 days.
The website for the firm carries branding aimed at children, including a yellow cartoon coin which the company hopes will attract young borrowers.
A work of satire
But the loans firm is, of course a "work of satire" from artist Darren Cullen, aimed at drawing attention to "the way the consumer credit industry preys on the vulnerable and targets children with marketing."
"Almost all payday loan companies have cartoon mascots, animated characters or sing-along jingles in their adverts," Cullen explains. "Their high street shops often have play areas full of toys and some of them hand out balloons and sweets to kids at the counter.
"It's a clear fact they target children, as both a means of persuading their parents, but also as a way to groom the next generation of indebted customers."
Pocketmoneyloans.com appears, at first glance, to be a legitimate service because Cullen has used terminology that mirrors that of recognisable payday lenders.
On the home page, consumers are told: "Getting a pocket money advance from Pocket Money Loans is easy-peasy!" It also states: "Money problems? Get out of debt with a loan."
Dig a little deeper, however, and the joke becomes more obvious: "We will look at how much your pocket money is before deciding on how much to offer you as a loan. Usually we will loan you just a little bit more than you can afford to repay." The website also states: "APR stands for Annual Percentage Rate and it's really confusing and boring."
Cullen - who produces art, illustration and comics at spellingmistakescostlives.com – is opening a pop-up installation at the Atom Gallery in Finsbury Park to showcase his Pocket Money Loans idea to the public.
He adds: "Payday loan customers who repay on time are in the minority and they offer the smallest profit margin to the company. It's the people who can't afford to repay on time who rack up charges and compound interest over weeks or months. That's where the real profits lie, built upon the backs of the poorest, most vulnerable members of society."
Short-term cash loans designed to be borrowed mid-way through the month to tide the borrower over until they next get paid, whereupon the loan is settled. Generally used by people with bad credit ratings and/or no access to short-term credit such as an overdraft or credit card. Like logbook loans, this type of borrowing is hugely expensive: the average APR on payday loans is well over 1,000% and in some instances can be considerably more.
This is effectively paying interest on interest. Interest is calculated not only on the initial sum borrowed (principal) or saved (see APR and AER) but also on the accumulated interest. The more frequently interest is added to the principal, the faster the principal grows and the higher the compound interest will be. Compound interest differs from “simple interest” in that simple interest is calculated solely as a percentage of the principal sum.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.