Costly ads lure Kiwis to high-interest loans

Instant Finance chief Richard de Lautour and Stacey Jones. Photo / APN

Critics want stricter regulation.

High interest, High Street lenders are spending millions marketing their controversial loans to struggling New Zealand families, new figures reveal.

Data obtained by the Herald on Sunday shows more than $6.5 million has been spent on advertising by the loan companies, according to the Nielsen reported rate card.

That includes only advertising booked through third-party agencies, so the true bill is likely to be much higher.

The advertising spend has renewed calls from National MP Peseta Sam Lotu-Iiga and budgeting organisations for more regulation of loan companies and their advertising.

Three months ago, the Advertising Standards Authority (ASA) received two complaints about television adverts for Superloans, which said: "See something you simply must have but you are short on cash? Go to www.superloans.co.nz and call into our nearest office and walk out with up to $2000 cash with absolutely no security required." The complaints were not upheld.

Instant Finance, whose advertisements are fronted by former Warriors captain Stacey Jones, has been subject to five complaints to the ASA, none ultimately upheld.

The ASA investigated an ad for loan company Avanti Finance, featuring a proud-looking Polynesian family walking out of a hospital with newborn triplets. Complainant J Kirk said the advertisement failed to mention the high interest rates and brazenly targeted vulnerable Pacific Islander families, but the ASA did not uphold the complaint.

Just last week, Avanti was fined $15,000 for breaching the Reserve Bank Act, by failing to maintain the required number of independent directors on its board.

The advertising rates card show the biggest spender is GE Money, which offers loans at rates up to 24.99 per cent a year. The company spent $2.824 million over the past year on television, newspaper, billboard and online advertising.

Second was Instant Finance, which lends at 29.95 per cent a year and spent $2.021 million, and third was Save My Bacon, which charges 547.5 per cent a year and spent $473,000 on radio advertising. A loan from Save My Bacon for $300 over four weeks would cost an extra $76.70 in interest and $43 in fees.

Save My Bacon spokesman Paul Park said the company did not want to comment on how much was spent on advertising or how effective it was. "A lot of what we do is commercially sensitive."

Cashburst, which has been advertising its "no-interest" loans over the festive season, is not mentioned in the figures. Advertising industry sources said that could be because the company was booking its advertising directly with media outlets. Its loans are interest-free for two weeks before interest is charged at 552 per cent a year.

Mangere Budgeting Services spokesman Darryl Evans said the amount being spent on advertising was appalling, but "nothing surprises me about them".

A spokeswoman for the Otara Budgeting Service said people usually went to high-interest lenders at their time of need, and often did read the small print.

Sam Lotu-Iiga called for both regulation and education. People were concerned at Stacey Jones advertising Instant Finance. "They're using a league icon to target low socioeconomic groups, people you'd consider vulnerable."