2. 2
URAP - UG Research Assistant Programme
• New in 2014/15
• Funded by BU Fusion Investment fund
• c. 40 posts
• ‘Guidance of an experienced academic in a
research position directly related to their career
path and/or academic discipline’
• Semester-based programme –semester 2
(Feb/Mar 2015). 10 hours per week for 8 weeks
• Summer programme –six weeks, 37 hours per
week June/July 2015
3. 3
URAP Background and context - Debt
• Many individuals are not well-equipped to
make sound financial decisions (FSA, 2006).
• 15 m people have reported signs of
financial difficulty (StepChange, 2014)
• Payday loan sector worth £2.2b with 240
companies (Cooper and Purcell, 2013)
• Consumers happy. Policymakers very
concerned. (Hawkes, 2013; CFA, 2012; OFT, 2012)
• New regulations to cap interest rates etc
4. 4
URAP Background and context -
students
• Debt amongst students high: 91% for FT and
63% for PT students (BIS, 2013).
• Students classified as vulnerable consumers
(FCA, 2015)
• Payday loan companies targeting student
sector e.g. Smart Pig and Peachy Loans
• 46,000 (6%) UK UG took payday loan
(NUS/Unite, 2014).
• NSU 2013 campaign to ban adverts on
campus SU activities to control sector
5. 5
Theoretical background – Decision
making process
• Long desire to explain consumer purchasing
behaviour in FS
• Characteristics of FS impact the decision making
process
• Propensity to seek advice and sources of advice
• Attribute set and priority
• Focus on debt context, source and choice of
money providers and specifically payday loan
companies
6. 6
Theoretical Background - Relationships
• Interest in building relationships has long been a goal in
financial services
• Extensive research into banking - not short-term cash
industry
• Mutual benefits such as trust and repeat business (Farquhar
and Meidan, 2010).
• Emphasis on equity, transparency and balance in
relationships (e.g. Murphy et al 2007).
• Transparency = better understand the products, the
price and empowers customer to evaluate more
effectively the product they are purchasing
• Focus – relationship between payday loan users and the
provider.
7. 7
Theoretical Background – Vulnerable
consumers
• No agreement on definition, but generally:
▫ someone who, due to their personal circumstances, is
especially susceptible to detriment, particularly when a firm
is not acting with appropriate levels of care. (FCA, 2015)
• Students well educated but young/ inexperienced
– a priority group?
• Students - high tolerance for debt, tendency for
over optimism on future income and capacity for
debt management.
• Focus on which students are in debt, reasons for
debt, their understanding and solutions adopted
8. 8
Recognising consumer vulnerability*
• low literacy, numeracy and
financial capability skills
• physical disability
• severe or long-term illness
• mental health problems
• low income and/or debt
• caring responsibilities (including
operating a power of attorney)
• being young (associated with less
experience)
*list is not exhaustive
• lack of English language skills
• being ‘older old’ for example over
80, although this is not absolute
• change in circumstances (e.g. job
loss, bereavement, divorce)
• non-standard requirements or
credit history (e.g. armed forces
personnel returning from abroad,
ex-offenders; care-home leavers,
recent immigrants)
Source: FCA (2015) Consumer
Vulnerability. Occasional Paper no.8
9. 9
Aims and objectives
• This project seeks to understand why students
might choose a payday loan, and the experience
they have with their payday lender.
▫ understand student’s decision making process
when choosing a payday lender;
▫ define the student/payday lender relationship,
and
▫ identify how the payday lending experience affects
student’s understanding of debt management
13. 13
22 &
under
67%
23 - 25
17%
Over 25
17%
Age Groups
Female
51%
Male
49%
Gender
UK
80%
Other
11%
Europe
9%
Country
Respondent Profile
Full time
95%
Part time
5%
Basis of study
N = 180
Undergrad
78%
Post Grad
11%
Doctoral
11%
Level of study
16. 16
Student debt
• 33% have borrowed money during their time at
university
• Major reason for getting into debt:
▫ Insufficient income to cover basic living costs 34%
▫ Insufficient income to cover lifestyle costs 27%
• 4th year UGs due to ‘lifestyle costs’
17. 17
Undergraduates Year of Study * Reasons for getting into debt
Reasons for getting into debt
Insufficient
income to
cover studying
costs
Insufficient
income to
cover basic
living costs
Insufficient
income to
cover lifestyle
costs
Unexpected
increase in
expenditure
levels
Unexpected
decrease in
income levels
Total
Undergraduate
Current Year of
Study
1st
year
Count 2 6 5 2 0 8
% 25.0% 75.0% 62.5% 25.0% 0.0%
2nd
year
Count 9 11 4 4 0 13
% 69.2% 84.6% 30.8% 30.8% 0.0%
3rd
year
Count 6 9 10 8 1 14
% 42.9% 64.3% 71.4% 57.1% 7.1%
4th
year
Count 6 14 13 5 3 16
% 37.5% 87.5% 81.3% 31.3% 18.8%
Total Count 23 40 32 19 4 51
Percentages and totals are based on respondents.
a. Group
Reasons for getting into debt
18. 18
Source of debt
• Family top at 24%, followed by bank overdraft
23%. Friends 10%.
• 4th year UG students more likely to use a credit
card
• Student age influenced choice:
▫ 22 and under more likely to use family or credit
card
▫ 23-25 - bank overdraft
▫ Over 25 - employment
23. 23
Impact of debt
• 48% concerned about their level of debt
• 34% debt has negative impact on studies
• 35% debt has negative impact on health
24. 24
Decision making
• Top sources of advice Family and Friends.
• Evaluation of finance sources primarily rated by
cost of repayment and speed of application
25. 25
Seeking advice about money
Sources of advice
Mean score 1 - 5
1 = most likely
Family 1.76
Friends 2.54
Internet 2.61
Student Services 2.68
Bank 2.85
Student Union 3.72
Other credit providers 3.78
26. 26
Evaluating sources of finance
Attribute Mean score 1-5 where 1 = most
likely
Cost of repayment 1.36
Speed of application 1.58
Length of repayment 1.76
Late payment penalty 1.95
Ease of application 1.97
Flexibility 1.98
Provider reputation 2.03
Simplicity of application 2.05
Anonymity 2.92
27. 27
Views on Payday loans
• Agree on:
▫ Speed of application
▫ Ease of application
▫ Simplicity
▫ Short term
▫ Penalties for late payment
• Disagree on:
▫ Good value
29. 29
Conclusion – Students as vulnerable
consumers
• Overall students most likely to get into
debt to cover basic living costs
• Vulnerable sub-group:
▫ 4th year students returning have moved up
in their socio-economic status during
placement and struggling to readjust
30. 30
Recognising consumer vulnerability*
• low literacy, numeracy and
financial capability skills
• physical disability
• severe or long-term illness
• mental health problems
• low income and/or debt
• caring responsibilities (including
operating a power of attorney)
• being young (associated with less
experience)
*list is not exhaustive
• lack of English language skills
• being ‘older old’ for example over
80, although this is not absolute
• change in circumstances (e.g.
job loss, bereavement, divorce)
• non-standard requirements or
credit history (e.g. armed forces
personnel returning from abroad,
ex-offenders; care-home leavers,
recent immigrants)
Source: FCA (2015) Consumer
Vulnerability. Occasional Paper no.8
