Innocent until proven guilty: are consumer credit advertisements misleading?

The buzz around consumer credit firms is still very much alive. Sophia Chang looks at the promotional regulations for consumer credit advertising and the FCA’s efforts to raise standards within this industry.

consumercredit280The buzz around consumer credit firms is still very much alive, and as new regulations frequently come into play, more firms are left writhing under the spotlight.

Since taking on the role of regulating the consumer credit sector in April this year, statistics from the Financial Conduct Authority (FCA) reveal that one in five consumer credit adverts do not comply with promotional standards.

THE RULES

Over 500 consumer credit advertisements were examined against the new promotional regulations set by the FCA and these deciding factors shaped the evaluation of the nature of the advertisement:

  • Adverts must be “clear, fair and not misleading for consumers” – FCA
  • Adverts must “enable customers to make informed decisions” – FCA

THE CONVICTIONS

Here are a few common examples of some firms’ advertising methods that failed to meet regulatory standards; gathered from the FCA’s findings:

  • Important information affecting the consumer that should have been made clear in advertisements was either missing or hard to locate
  • Urging consumers to click the ‘apply’ button before being able to access important information
  • Using colouring-in styled pamphlets, young audiences were targeted with high-cost, short-term loans that were only legally available to over 18’s
  • Promoting the firm’s products as being able to help consumers repair their credit ratings
  • Claiming the firm’s products would help to clear consumer debts, when in reality the newly acquired debt would be used to pay another
  • Lack of prominent warning when bringing product risks to customers’ attention
  • Hidden fees for credit broking services were missing from documentation or concealed within the terms and conditions
  • Primarily focusing on the benefits of the product; providing no explanation of any risks of non-repayment

THE TRIAL

After reviewing 554 consumer credit financial promotions, the FCA opened 108 cases in the following sectors; credit cards, debt management, motor/retail finance, home collected credit, logbook loans, pawn broking, payday lending, secured lending and other secured broking.

THE SENTENCE

A total of 75 out of 108 firms responded to the investigation and were required to revise or withdraw selected promotions when acknowledged for non-compliant advertisements. These were found across various mediums including, print, in-store, online and direct mail. The remaining firms have yet to respond.

The FCA have announced that consumer credit firms need to make more of an effort to raise their advertising standards and promotions will continue to be monitored meticulously by the FCA; providing help and support in order to make a breakthrough change in improving advertisements to benefit consumers. The FCA also handles public complaints regarding advertising violations via the Advertising Standards Authority.

Have you found consumer credit advertisements to be misleading? How have they affected you? Tell us your thoughts and stories via Twitter or LinkedIn!

 

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