On 6 May 2022, the UK Financial Conduct Authority published a press release and a ‘Dear CEO’ letter to consumer credit firms telling them to stop using misleading terms in their advertising.
The FCA has written to almost 28,000 consumer credit firms “warning them not to use terms such as ‘no credit check loans’, ‘loan guaranteed’, ‘pre-approved’ or ‘no credit checks’ when marketing loans”. The FCA’s concern is that firms are giving consumers a misleading impression that they will automatically get a loan.
The FCA’s ’Dear CEO’ letter says:
– it expects authorised firms who are issuing and/or approving consumer credit financial promotions to “ensure that all communications of financial promotions are clear, fair and not misleading and otherwise comply with the rules set out at CONC 3. This includes ensuring that those to whom a financial promotion is addressed, or at whom it is directed, understand the nature of the firm’s regulated activities”;
– it has identified a number of financial promotions including phrases like “‘no credit checks loans’, ’loan guaranteed’, ‘pre-approved’ or ’no credit checks’” (some of which could lead consumers to believe that there are no credit checks);
– some firms promoting high-cost short-term credit have failed to include the late payment warning under CONC 3.4.1R;
– whilst the FCA is aware that some advertising media “might appear to pose challenges for firms in meeting” the FCA’s requirements, those rules are “media neutral” and the FCA considers it possible to comply (but it is relaxed on some minor changes to the warning for platforms which do not accept logos);
– some promotions have failed to include a representative APR; and
– certain promotions by credit brokers fail to state they are brokers and not lenders (as required by CONC 3.7.7R).
The FCA also reminds firms of the requirement to comply with the codes published by the Advertising Standards Authority.
Whilst the FCA says the ’Dear CEO’ letter applies to credit brokers and firms providing high-cost lending products, it has clear read-across to other consumer credit products.