The financial regulator, the Financial Conduct Authority (FCA), reviews financial promotions issued by authorised firms on a continuous basis. In the first quarter of 2015, it reviewed 2,023 promotions, and while only 86 of these resulted in a need to amend or withdraw the promotion, 51 of these promotions (59%) were from the consumer credit sector.
Consumer credit became regulated by the FCA in April 2014. The FCA firstly asks that all promotions and other communications with customers meet its ‘clear, fair and not misleading’ principle.
Clear, fair and not misleading means that communications:
• Are identifiable as communications or financial promotions from a particular firm (Some firms have for example been censured for sending communications that appear to be from friends of the recipient).
• Are accurate
• Give a balanced view of the advantages and disadvantages/risks of the relevant course of action
• Are likely to be understood by the average member of the group at whom they are directed
• Do not disguise, obscure or draw attention away from important information, statements and warnings. (Some recent promotions, whilst stating the Annual Percentage Rate (APR) as required, have not displayed it sufficiently prominently, or have suggested in some way that the rate is less relevant than other information).
Consumer credit firms then need to comply with a series of detailed rules regarding the content of promotions. Other key rules regarding credit promotions include:
• If a communication compares one product with another product, whether or not that other product is also provided by the firm, then the comparison must be fair and balanced, and ideally compare like with like.
• For certain product types, risk warnings need to be included. These include “YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT” for a secured loan, and “Late repayment can cause you serious money problems. For help, go to: moneyadviceservice.org.uk” for a payday loan.
• Whenever interest rate or cost information is included within a promotion, other than simply stating the representative APR, a great deal of additional financial information also needs to be included
• As well as when cost information is given, the representative APR must also be included when the promotion: states or implies that credit is available to customers whose access to credit might be restricted, states or implies that credit is available on more favourable terms than with other providers, or provides any sort of incentive to enter into the credit agreement.
• Restrictions on use of terms such as ‘Loan guaranteed’, ‘Pre-approved’ or ‘No credit checks’
• A communication from a credit broker should make it clear how many lenders they can offer products from.
• Communications must use plain English, be legible and state the name of the firm making the communication (or the name of the firm on whose behalf it is made should a regulated firm use a third party for its communications). For a credit broking communication, the name of the lender should be stated, where this is known
The FCA has previously highlighted the following issues with credit firms’ promotions:
• Targeting under 18s
• Falsely claiming a debt solution will repair a customer’s credit rating
• Stating that a debt solution will clear a customer’s debt, when in fact one form of debt will be replaced with another
Firms may think of advertisements in publications, on TV and on the radio when they hear the word ‘promotions’. They should note that their website is also considered to be a promotion.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.