Moneylenders under pressure over ads

An advertisement from moneylender Rush N Cash. Moneylenders have been criticized for allegedly exaggerating in commercials. / From the Rush N Cash homepage

By Yoon Ja-young

The government and lawmakers are moving to curb the allegedly exaggerated or false information Rush n Cash and other moneylenders are running advertisements on TV and the Internet.

On top of restricting the time the moneylenders can run ads, regulators are considering lowering the maximum interest rate on loans to below 30 percent from 34.9 percent.

According to Korea Communications Commission data submitted to Rep. Kang Gi-jung of the main opposition New Politics Alliance for Democracy (NPAD), moneylenders are running on average 1,043 ads on 38 major cable TV channels daily.

The ads seem to be effective. A survey by the Consumer Loan Finance Association, an association of moneylenders, shows that more than half of those who borrowed money from them cited TV ads as their source of information on where to borrow.

Previously, these ads relied on celebrities to make appeals to consumers. Celebrities eventually were reluctant to appear because of public opinion.

Moneylenders are now focusing on telling consumers how they can help those in need of cash, but the ads are often exaggerated or false, analysts say.

The ads often claim that anybody can get loan in as fast as three seconds. But, in reality, those applying have to go through a screening process and only about 20 percent of them are offered loans.

Essential information ― such as high interest rates and a possible negative effect on their credit ratings ― is only shown in small print or is too quick for many viewers to read.

Experts say that the problem is more serious, because children and the underprivileged are more vulnerable to the TV pitches.

A survey of elementary schoolchildren between the ages of 10 and 12 showed the negative effect of these advertisements.

When asked which images strike them when they think of the moneylender advertisements, the children picked images like models smiling while borrowing money, or a pile of bills suddenly reaching them.

TV viewers are also aware of the negative impact of the moneylender advertisements.

In a survey by the Korea Institute of Finance of 500 adults last year, 90.4 percent said the financial ads had problems. When asked which advertisements were problematic, 72.1 percent picked those of moneylenders, followed by insurance ads at 9.7 percent.

Lawmakers are now moving to restrict moneylender advertising.

Rep. Shim Jae-chul of the governing Saenuri Party, for instance, has submitted a bill that restricts moneylenders’ advertisements to between 7 a.m. and 9 a.m. and to between 1 p.m. and 10 p.m., to protect children and teenagers.

The bill should pass the National Assembly, but cable TV channels and moneylenders are opposing it.

The Consumer Loan Finance Association said that such a restriction was likely to violate their rights, such as freedom of expression, guaranteed in the Constitution.

Rep. Lee Hack-young, of the NPAD, urged the government to take action.

“To prevent damage to financial consumers by the moneylenders, there should be restrictions on the words they use in ads, or how many times or how often the advertisements can be run,” he said. “The Financial Services Commission (FSC) should prepare measures.”