Aug 01, 2013 Simon Williams
Many consumers decide to finally use products or services after they see promotions on a variety of mediums, be it television commercials, billboards, digital ads or other channels. How can companies be successful if executives aren't allowed to market?
This is a reality U.K.-based lenders might be facing in the near future. The industry has been under fire recently in the nation, despite the fact that it was instrumental in ensuring that citizens, even those who saw large drops in their consumer credit scores during the global recession, still had money available to make ends meet. This has caused British lawmakers to begin considering making advertising illegal for short term lenders operating across the country.
This presents a major issue. How will consumers know about the various options and services short term lenders offer if they aren't advertised? It might behoove lenders to pay attention to exactly how they can promote their businesses in the near future - they are still allowed to market in certain ways, but other strategies might be outlawed. If they break the law, their good work could be nullified and they will no longer be able to help British consumers.
Sweeping prohibitions across the nation
According to The Guardian, some leaders in the United Kingdom seem to be trying to do whatever they can to place more regulations on the industry. Oversight committees, regional prohibitions and other laws have come into play recently.
However, the news source reported that the focus right now is largely on advertising. The Financial Conduct Authority (FCA) is releasing a paper on the industry in the fall outlining the thoughts the group has on policing companies before they take over the regulation of the short term lending sector in April 2014. Representatives said they would be paying special attention to the way they appeal to customers, particularly those who are young.
In fact, FCA leader Martin Wheatley said that the organization would be considering outlawing advertising altogether, but that would be an extreme move, the newspaper detailed.
Effects thus far
The Guardian reported that the effects of the increased focus on advertising have already been seen in some areas. Namely, at universities across the U.K., many administrators don't allow short term lenders to promote their services on campus.
Though the FCA efforts to change marketing regulations will affect the whole country, local leaders have taken notice and are considering new laws themselves. According to a separate article published by The Guardian, the Plymouth City Council has blocked access to short term lending websites and outlawed billboards and bus stop ads promoting the services.
This is the first time a local government has taken this action, the news source noted. Commercial partners had to be consulted so that they could take such ads down in public places. Government leaders did note that not all billboards were covered or taken down immediately, but consumers should expect full compliance with the law in the near future.
No real change to businesses
Despite these changes, short term lenders are still allowed to operate in the U.K. And regardless of whether or not consumers have ready access to promotional messages, they must still remember that these were among the few financial institutions that extended credit during the Great Recession.
Lenders were able to do this by taking alternative consumer credit scores into account. For instance, rather than relying on mainstream ranking systems, many compiled scores based on positive repayments on utilities accounts, among other financial data points.
The best way these companies can advertise should they be prohibited on a national scale is by providing impeccable service to their clients. If consumers have an outstanding experience, they are not only likely to become loyal, repeat customers, but they'll also spread the word to their family and friends.