Vulnerable consumers

From an industry perspective, a vulnerable consumer is ‘…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, p.7). They are groups of consumers who may ‘…have idiosyncratic reactions to products that are otherwise harmless when used by most people’ (Morgan et al., 1995, p.267). The most comprehensive definition available within consumer literature is from Baker et al. (2005, p.7), who offer:

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“Consumer vulnerability is a state of powerlessness that arises from an imbalance in marketplace interactions or from the consumption of marketing messages and products. It occurs when control is not in an individual’s hands, creating a dependence on external factors (e.g., marketers) to create fairness in the marketplace. The actual vulnerability arises from the interaction of personal states, personal characteristics, and external conditions within a context where consumption goals may be hindered and the experience affects personal and social perceptions of self.”

They stipulate that this definition ‘…focuses on the experience of consumer vulnerability; it does not say who is vulnerable, because everyone has the potential to be’ (Baker et al., 2005, p.7). Vulnerability is ‘…inherently object and agent specific’ (Goodin, 1985, p.112), in that ‘Some person (P) is vulnerable to a (moral or causal) agent (A) with respect to some harm (H) in a particular context (C)’ (Brenkert, 1998, p 298).

Several outlets, both academic- and industry-based pointedly state that anyone can become vulnerable (e.g. Parker et al., 2012; FCA, 2015). Vulnerability is a fluid state that can be temporary or permanent, with varying degrees of severity (Brenkert 1998; FCA, 2015). As Baker et al. (2005, p.10) state: ‘Consumer vulnerability is a condition, not a status’. Therefore, experiences of vulnerable states are not always constant; although certain people may be at more risk of being vulnerable more often.

Baker et al. (2005) proposed a conceptual model to define consumer vulnerability (Fig. 25). They suggest that individual characteristics, individual states and external conditions contribute to the experience of vulnerability in a consumption context. This has a direct influence on the consumer response, and how they remember the experience in the future.

A strength of this model is that it tries to represent consumers as active participants, with previous histories, in the experience; not just reacting to the marketplace conditions. It tries to account for more personal emotive states than previous models e.g. Morgan et al.’s (1995) typology. The Baker et al. (2005) model is currently one of the most popular models used to discuss consumer vulnerability, although it is contextually weak as different contexts warrant sight revisions, e.g. in relation to gender identity McKeage et al.

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(2017) suggest collapsing the individual factors into one category, and adding an ‘activism’ section, amongst other revisions. Similarly, Adkins and Jae (2010) expand the model to suit limited English proficient consumers.

Fig. 25: Conceptual model to define consumer vulnerability (Baker et al., 2005, p.8)

Traditionally, vulnerable consumer groups include children (e.g. Workman, 2003; Roper and Shah, 2007; Cismaru et al., 2008; Spotswood and Nairn, 2016), bottom-of-the-pyramid consumers (e.g. Arnold and Valentin, 2013; Gupta and Pirsch, 2014), the elderly (e.g. McGhee, 1983; Benet et al., 1993; Berg, 2015), or those with health problems (e.g. Andréasson et al., 1987; Ferguson and Olson, 2014).

Much of the academic marketing research around vulnerable consumers focuses on the ethics of targeting of ‘harmful’ products towards vulnerable consumers (e.g. Smith and Cooper-Martin, 1997). Harmful products – often called ‘sin’ products (Smith and Cooper-Martin, 1997; Jones and Middleton, 2007) - includes products such as gambling (e.g. Boughton and Falenchuk, 2007), alcohol (e.g. Cui, 2000; Workman, 2003; Cismaru et al., 2008), and tobacco (e.g. Ferguson and Phau, 2013).

Financial services are sometimes considered harmful, with research having been conducted on credit cards (e.g. Braunsberger and Lucas, 2004; Mansfield and Pinto, 2008), life insurance products (e.g. Lin and Grace,

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2007), predatory lenders (e.g. Carr and Kolluri, 2001), banking services (e.g. Servon and Kaestner, 2008). Research on financial vulnerability often focus on the financial literacy of the consumer. Financial literacy is used interchangeably with ‘financial knowledge’ and ‘financial education’ (Huston, 2012). Generally, consumers with low financial literacy are more likely to have significant levels of debt (Lusardi and Tufano, 2009), and make substandard financial decisions throughout their lifecycle (Hilgert et al., 2003; Lusardi and Mitchell, 2007, 2017; Mandell and Klein, 2009; Allgood and Walstad, 2016; Brown et al., 2016). Having considered the literature on financial literacy, this concept falls outside of the boundaries of this research. In exploring the lived experience of individuals, levels of financial literacy cannot be accurately determined, and is not the focus of the research. In line with the existing research, I also think the notion of low financial literacy immediately implies poorer outcomes. However, from the contextual research conducted (see Chapters 1 and 2), people who use payday loans do not appear to fall into the typical low education bracket.

Instead, the industry literature points more towards ‘associated risk factors’ of becoming financially vulnerable (FCA, 2015). The FCA (2015) identifies factors such as an illness diagnosis, bereavement, or caring responsibilities. This is discussed in the academic literature, but is limited. For example Lien et al. (2016) studied traumatic personal experiences such as PTSD or abuse situations. Treanor (2016) explored bereavements, illnesses or unexpected bills, and McCallion and Ferretti (2017) investigated the aging process. All of these studies indicate that to some degree, experiencing one or more of these risk factors are likely to contribute to a person being financially vulnerable. These risk factors are more likely to be identifiable within the scope of this research than the issue of financial literacy.

There are a variety of predicted social issues that may contribute to UK consumers’ financial vulnerability in the future. For example:

• 40% of working-age adults have savings of less than £100, and would struggle to pay an unexpected bill (MAS, 2016b)

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• Just under half of UK adults have a numeracy attainment age of 11 or below (FCA, 2015)

• Nearly one in three UK adults have experienced leave from work due to ill health, or a death in the family, with almost 80% of these

suffering negative financial consequences (Aviva, 2017)

• By 2020 half of the UK population will be diagnosed with Cancer at some point in their lives (Cancer Research UK, 2015)

• Of the 7.1 million UK adults that had never used the internet in May 2013, over half were disabled, and nearly half were over 75 years of age (FCA, 2015)

• 1 in 8 adults (6.5 million people) are carers. This is expected to rise to 9 million by 2037. 1 in 5 carers give up work all together, with the main carer’s benefit being £62.10 for 35 hours work – or £1.77 per hour – which is considerably less than minimum wage (Carers UK, 2015)

Other identified issues could be unexpected major expenses, rising costs of living, and an aging population.

Interestingly, the notion of vulnerability may be difficult to explore with payday loan users. Notably, the FCA (2015, p.7) suggests that ‘…Many people in vulnerable situations would not diagnose themselves as ‘vulnerable’. Similarly, Baker et al. (2005) imply that a consumer might not necessarily agree that they are vulnerable. This may be due to expectations of what ‘vulnerable’ is, e.g. unemployed, lower social class, low education level, or long-term illness sufferers. Immediately, this typology does not appear to fit with the profile of typical payday loan consumers (see Section 2.4.5). However, the reasons for taking payday loans (Section 2.4.7), do resonate with the prominent risk factors identified by the FCA (2015). This aspect of financial vulnerability will be explored within the thesis.

134 3.6.2.1. Stigmatization

Payday loans are associated with stigma (Hall et al., 2013; Press Association, 2014a; Brown and Woodruffe-Burton, 2015; Collinson and Jones, 2016; Spencer, 2017; Lieberman et al., 2018). As such, an element of interest within the Baker et al., (2005) model (Fig.25), is the External Conditions’ box under which ‘Discrimination, Repression and Stigmatization’ is identified. They state that ‘groups may be singled out on the basis of age, gender, race, class, education, religion, sexual orientation, ethnicity, income, residence, physical appearance, physical abilities, and so forth’ (Baker et al., 2005, p.130). However, they do not elaborate otherwise of the notion of stigmatization. The examples provided by Baker et al., (2005) tend to be personal attributes, rather than the type of product in which the consumer engages, such as payday loans. This may have been a generalisation; however the prevalence of payday loans being stigmatized may be the key to unlocking an aspect of why payday loan consumers are fluidly vulnerable. As such, the following section will consider a selection of literature on stigma, with a view to considering stigma in the findings of this research.

Stigma is socially constructed; it is relationship- and context-specific (Major and O’Brien, 2005). People who are stigmatized are considered to have an attribute that discredits, devalues or discounts the social identity of an individual (Goffman, 1963; Crocker et al., 1998, Major and O’Brien, 2005). Major and O’Brien (2005, p.395) suggest that the attribute marks people as different, and that these marks ‘…may be visible or invisible, controllable or uncontrollable, and linked to appearance […], behaviour […], or group membership’. A stigmatizing mark may cause the bearer to be excluded or avoided by members of a social group (Major and Eccleston, 2004; Hamilton, 2009a, 2012). Stigma can result in poorer well-being, causing heightened negative emotional states in individuals, such as alienation, shame, and self- hate (Goffman, 1963; Major, 2006).

This definition appears to apply to product categories. Traditionally stigmatized product groups include cigarettes (Brandt, 1996; Banning, 2001; Kim, 2011), alcohol (Banning, 2001; Kim, 2011, Barlow et al., 2016),

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weapons (Vergne, 2012; Blithe and Lanterman, 2017), and pornography (Hefley, 2007; Voss, 2015), amongst others.

Payday loans appear to not only be a stigmatized product group in themselves (Hall et al., 2013; Brown and Woodruffe-Burton, 2015; Lieberman et al., 2018), but payday lenders are often associated with unethical behaviour (Burton, 2008; Robinson and Robinson, 2018). This potentially further socially devalues, and therefore increases the associated stigma, around these products. The effects of association, both in terms of people and organisations, with stigmatized categories is well documented, with social disapproval or degradation increasing with stronger levels of association (Mehta and Farina, 1988; Kwak et al., 2001; Vergne, 2012; Barlow et al., 2016).

Payday loans as a product category notwithstanding, an additional consideration is the stigma surrounding an individual with a lack of money. Not having money - having debt - is often a stigmatizing mark (Logemann, 2015). Being in debt can be considered personal failure (Coleman, 1999; Pemberton et al., 2016), and can heavily impact on mental and physical health (Selenko and Batinic, 2011; Sweet et al., 2013; Eisenberg-Guyot et al., 2018). The Credit Services Association (CSA) has identified debt and mental health as a ‘double stigma’ that is particularly challenging for consumers (Mackenzie, 2016).

Indeed, the topic of debt considers many different stigmas such as social class, type and amount of debt. For example, Logemann (2015) discusses how in the nineteenth century, working class debt was particularly stigmatized, whereas the higher classes escaped such bias. Interestingly, a recent study exploring debt stigma and socioeconomic class highlighted a major shift in how social class considers serious debt:

…the higher an individual’s social position based upon factors such as income, education, occupational prestige, and self- identified social class, the greater the likelihood of agreeing with the idea that an individual has a right to commit suicide as a result of serious financial problems. This measure reflects

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whether one would or should feel shame, stigma, or embarrassment because of troubling financial debt.

- Sousa, 2017, p.965

Types of debt can have particular stigmas, such as pawning (Woloson, 2009), unmanaged mortgage debt (Keen and Cowan, 2015), credit card debt (Laibson et al., 2000) – although the strength of credit card debt stigma has been disputed (Durkin, 2002). Payday loans are sometimes consider part of the highly stigmatized ‘fringe economy’, alongside pawnshops, doorstep loans, and log book loans (Karger, 2005; Eisenberg-Guyot et al., 2018). At the tipping point of debt, when it becomes unmanageable, bankruptcy is considered a highly stigmatized and embarrassing process (Dickerson, 1998; Efrat, 2006; Thorne and Anderson, 2006; Selenko and Batinic, 2011). The cultural normalisation of certain debt is a contemporary trend (O’Loughlin and Szmigin, 2006), although there is still a strong negative construct that marginalises unmanaged debt (Peñaloza and Barnhart, 2011).

Returning to focus on the stigmatized consumer, Major and O’Brien (2005) propose that stigma is potentially a threat to the identity of an individual. They created a model that integrates previous identity threat models of stigma, with models of stress and coping (Fig. 26).

Fig. 26: An identity-threat model of stigma (Major and O’Brien, 2005, p.398)

137 They explain that the model:

…assumes that [a stigma] increases one’s exposure to potentially [identity-threatening] situations. Collective representations (box A), immediate situational cues (box B), and personal characteristics (box C) affect people’s appraisals of the significance of those situations for their well-being. Identity threat (box D) results when an individual appraises the demands imposed by a stigma-relevant stressor as potentially harmful to his or her social identity, and as exceeding his or her resources to cope with those demands. Responses to identity threat can be involuntary (e.g., anxiety […]) (box E) or voluntary (e.g., coping efforts; box F). […] Both involuntary and voluntary responses can be distinguished from the outcomes of those responses, such as self-esteem, academic achievement, and health (box G).

- Major and O’Brien, 2005, p.389-90 The model accounts for a variety of inputs, consideration and outputs, particularly in terms of involuntary responses e.g. shame (Goffman, 1963), anxiety (Spencer et al., 1999), or raised blood pressure (Blascovich et al., 2001), and voluntary responses, where the individual actively decides on a route forward. Stigma management strategies tend to be defensive and self- directed, as individuals tend to accept the stigma and find ways to continue on in society, whilst actively managing their conceptions of self (Goffman, 1963; Adkins and Ozanne, 2005; Toyoki and Brown, 2013). Stigma management strategies include contact avoidance/limitation, retreating from society, stigma masking/feigning normalcy, hostile bravado, identity ambivalence, disassociation from stigmatized identities, and creating self- affirming spaces (Goffman, 1963; Snow and Anderson, 1987; Hill and Stamey, 1997; Hamilton, 2012; Toyoki and Brown, 2013; Keene et al., 2015; Pemberton et al., 2016). There have been documented examples of stigma management strategies that initially appear counterintuitive, but satisfy the agenda of the individual e.g. listening to socially stigmatized music as an identity project (Henry and Caldwell, 2006), or consuming out-of-date food for environmental reasons (Sen and Block, 2009). Furthermore,

Although the identity-threat model of stigma (Fig. 26) was proposed to explain behaviours in stigmatized groups e.g. Transgender women of colour (Sevelius, 2013), the obese (Almenara et al., 2017; Hand et al., 2017),

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mentally ill (Redding, 2012; Gyamfi et al., 2018), it appears less well considered in relation to consumers engaging with stigmatized products, which could be relevant within the context of this research.

Within the personal finance context, research on stigma management largely considers low-income or impoverished consumers, who may be unable to consume goods required for a socially accepted standard of living (Darley and Johnson, 1985; Bauman, 2004; Hamilton, 2012). Similarly, research has considered stigma around personal bankruptcy (Sullivan et al., 2006; Thorne and Anderson, 2006). Yet these contexts have value, the typical payday loan consumers is unlikely to be impoverished by contemporary standards, and is unlikely to have experienced personal bankruptcy, so the context of the payday loan consumer may reveal new insights.