Researchers from Newcastle University have suggested a ‘credit curfew’ could help stop consumers from spiralling into debt.

The experts claim that banning people from taking online loans between 11.00 pm and 7.00 am could reduce problematic borrowing. Statistics show that if more people take out payday loans between these hours, rates of indebtedness increase.

The researchers have produced a report – entitled Digital Credit, Mobile Devices and Indebtedness – which warns that digital credit services can encourage impulse borrowing.

Because loan websites are often designed to give consumers a misleading sense of control, they frequently borrow more than they can realistically pay back.

This problematic behaviour is encouraged because it is easy to access these websites from smartphones, tablets and other devices at any time of the day or night.

Dr James Ash, from Newcastle University’s Department of Media, Culture and Heritage, said, “Urgent reforms are needed to protect consumers from financial and psychological risks.”

“The shift online has increased the availability of payday loans to people previously excluded by mainstream lenders.”

“But our research shows that digital access to credit only offers quick fixes – it doesn’t address borrowing’s root cause.”

“24-hour access to credit from any device is leading to unsustainable borrowing. This can contribute to long-term personal and financial hardship and mental health problems.”

The research – by academics from Newcastle and Durham Universities – found that the websites use sliding bars to show minimum and maximum amounts that can be borrowed. The way these bars are shown makes the amounts consumers wish to borrow appear reasonable.

The websites also encourage people to borrow because of the anonymity of the online application process. Customers do not feel the social pressure of having to explain themselves to a real person and risk being rejected by them.

In addition, the report shows that loan providers often target consumers through their mobile devices, urging them to take out more credit, thereby increasing levels of anxiety.

During their study, the researchers conducted interviews with 40 consumers of payday loans, as well as debt organisations. They analysed 30 digital borrowing websites and interviewed their designers.

The cash and payday loans sector has expanded rapidly in the last five years. Though regulators have introduced some credit limits, little has been done to address the issue of borrowing online.

The Digital Credit, Mobile Devices and Indebtedness report recommends that customers should not be enticed by text and email to take out more credit and that customers who do not complete an application process should not be digitally pursued.

The report also states that the application pages of websites should encourage customers to reflect on their decisions before taking out loans.

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