A team of researchers led by experts from Newcastle University has highlighted how slick, well-designed websites and apps can be used to sell high-cost loans to poor and vulnerable people.
The websites include sliders that customers can play around with, brightly coloured ‘apply now’ buttons, forms that are simple to complete, and images of happy customers.
Clients can get a loan approved in just ten to 15 minutes – usually without having to speak to another person.
The study’s lead researcher Dr James Ash – from Newcastle University’s Department of Media, Culture and Heritage – said, “The way websites and apps have been designed makes them incredibly easy to use, but hard for users to stop and think about what they’re doing while they are applying.”
“The borrower thinks they are in control, but – in fact – they are being cleverly guided through the whole process. This has led to this market growing at a high rate in recent years.”
The Newcastle researchers – along with colleagues from Durham University – identified a High Cost Short-Term Credit (HCSTC) market, which they argue includes cash and payday loan providers as well as the providers of guarantor loans and logbook loans.
In this market, fairly small amounts of cash are lent for relatively short amounts of time. The HCSTC market – which is also referred to as Fringe Finance – is thought to be worth £2 billion per year.
82% of all cash and payday loans in the UK are currently applied for and approved over the Internet.
During their study, the researchers interviewed 11 website developers and 40 customers.
The research team found that sliders were a common component of loan websites and apps. The sliders typically had two bars – one stating the amount of money that could be borrowed, the other referring to the borrowing time.
The web designers found that the more someone played with the slider, the more likely they were to apply for a loan. The researchers felt playing with the slider gave the client more time to become involved in the application process, making them less likely to drop out.
It also became apparent that the colour of the ‘apply now’ button could influence customer behaviour. One website that changed the colour of its buttons from red to orange experienced an 8% surge in applications.
Forms on the sites were designed to be as simple as possible – as it was felt ‘official-looking’ documents might put customers off.
Dr Ash continued, “What is particularly worrying about the growth of this market is that the people who use them are often some of the most vulnerable sections of society.”
“Some of the people we spoke to didn’t even consider the payday loans as debt. It was simply another form of income they had and another bill that had to be paid.”
“There’s evidence that this kind of lending is unsustainable and can exacerbate mental health issues.”
You can learn more about the research of the team at http://www.debtinterfaces.org.uk/our-research/our-report/.
(Featured image courtesy of Mike Lawrence from Flickr Creative Commons)