ASA scolds Sunny payday loans for concealing 1971% APR

The Advertising Standards Authority (ASA) took action against the payday lender Sunny, also known as Think Finance. At issue are a couple of advertisements where the payday lender failed to clearly state the cost of borrowing.

Who is Sunny

They are a payday lender that provides short-term emergency loans to residents that need immediate cash. Sunny is a trade name for Think Finance, which was cited in a complaint by the ASA.

Many consumers have been turning to these high-cost loans out of desperation. Sunny is one of many payday loan operators that provide these expensive products as a last resort to desperate borrowers, many of whom have already been denied credit by their bank.

What interest rate does Sunny charge on payday loans?

How much would you pay to borrow money in a pinch? Your credit card charges a current average of 17.1%. Would you be willing to pay 115 times that amount?

The representative rate quoted by Sunny on its website was 1971% APR, which is effectively 115 (one hundred and fifteen) times the rate currently charged by the average UK credit card. This type of rate falls into the disgustingly unaffordable category, yet thousands of borrowers fall victim to this and other predatory loan products every month.

Is this legal?

Sadly rates like this are legal in the UK. The government regulates loan companies who must register with the Financial Conduct Authority (FCA). The FCA recently began enforcing tougher disclosure rules that apply to payday loan operators.

One of the rules is that usurers must disclose to an applicant if they will actually charge one arm and one leg. As long as they supplied notice, they are free to break out the hacksaw (figuratively of course)! That might be a little extreme, but it shows the amount of power still given to high-interest lenders.

In an attempt to at least give applicants some chance at making a wise choice, lenders must provide notice of the actual borrowing costs in the advertisement. This cost must be represented as an annual percentage rate (APR), even if they lender provides other rates (such as monthly or daily rates) in an attempt to mask the overall finance charges.

In its announcement, the ACA stated that Sunny failed to properly disclose the borrowing costs in two of its recent advertisements. Those two ads are banned until the lender can make the required changes to bring them into compliance. So while Sunny can still offer the loans, they must bring their advertisements into compliance before they may use them for marketing purposes.

Borrowers who are looking for some quick cash may find that a loan product from a bank or credit union is a drastically cheaper option. When in doubt, always contact your local Consumers Advice Bureau for a free recommendation on how to deal with a financial emergency.