Category: Financial promotion

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FCA publishes finalised guidance on financial promotions on social media

Earlier today, on 26 March 2024, the UK Financial Conduct Authority published a press release and finalised guidance on financial promotions on social media.

There’s much in the guidance but some headline points for now are:

– The FCA has repeated its guidance that it expects financial promotions to be standalone compliant. While promotions of complex financial products “might require additional supporting information or disclosure“, the “initial promotion needs to remain compliant in and of itself“.

– The requirement for prominence in the FCA’s handbooks is “media-neutral“. Firms should consider the existence guidance on prominence. Firms should ensure information which is required to be displayed prominently “is displayed without needing click-through or any other optional action to view it“.

– Social media may not always be appropriate to promote financial products.

– There are some examples of how an unregulated BNPL financial promotion could be published.

– Firms are reminded of the consumer duty and how it could apply to social media.

– There is a real focus on influencers (or finfluencers).

– There’s guidance for firms on what ‘in the course of a business‘ means. The FCA makes it clear that this includes any level of commerciality. There are also some examples in paragraphs 4.20 to 4.27.

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FCA publishes draft guidance on financial promotions on social media

On 17 July 2023, the UK Financial Conduct Authority (the FCA) published a press release and draft guidance dealing with financial promotions on social media. This has been a hot topic for a number of years. The consultation period ends on 11 September 2023. Responses can be sent by email to gc23-2@fca.org.uk.

The key messages from the draft guidance are that:

– The FCA proposes to keep the key principles of Finalised Guidance 15/4, including its expectation that financial promotions should be standalone compliant.

– The consumer duty (which comes into force on 31 July 2023) will “raise our expectations of firms communicating financial promotions on social medium above the requirement of Principle 7 to be ‘clear, fair and not misleading’.“

– The FCA will continue to focus on compliance issues on social media (and, in particular, says firms should consider whether financial promotions for debt counselling would be appropriate given the complexity of such services).

– For unregulated buy-now, pay-later products, the promotion must outline the relevant risks and be balanced (and there’s a proposed example, in Figure 6, of a clear, fair and not misleading promotion).

– The FCA sets out its expectations on prominence standards for social media channels.

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Financial Conduct Authority warns businesses to stop misleading credit adverts

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.

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Advertising Standards Authority publishes replacement ruling that credit financial promotion was irresponsible

On 11 May 2022, the Advertising Standards Authority published a replacement ruling deciding that a radio advertisement for the online shopping provider Very was irresponsible.

The radio advertisement “featured a woman who stated, “My Bella is logo mad. I tell you what, she’d rather go to school in her socks than in trainers that aren’t Adidas or Nike. But, I wanted to treat her, so I went to Very and got all the stuff she wanted, and I was able to spread the cost. This was a really big year for Bella, and I want her to smash it …”, followed by a voice-over that stated, “With Very Pay, you have a choice of ways to pay for this very big school moment. Life is this very moment””.

The Advertising Standards Authority decided that the advertisement “pressure on parents to purchase branded shoes or other expensive designer items, on the basis they could play a significant role in their child’s success at school” and that “branded shoes, in and of themselves, were not a necessity in the same way that school shoes were more generally”. It also decided that the advertisement’s “messaging explicitly connected the use of a form of credit to buying more expensive goods, such as branded goods, and played on the anxieties parents might feel about their children starting or returning to school”.

The Advertising Standards Authority therefore concluded that the advert breached BCAP Code Rule 1.2 (on responsible advertising) because it “irresponsibly encouraged the use of credit to finance spending on expensive branded goods”.

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FCA publishes financial promotion case studies

On 9 July 2021, the UK Financial Conduct Authority published financial promotion case studies (which were updated in October 2021). The FCA said it recognised “the need to provide information for firms to understand the financial promotions rules that apply to particular products and services“.

It has therefore published two short video case studies:

– the first is a case study for a hire purchase agreement which includes common mistakes the FCA often sees firms making; and

– the second is a case study for claims management companies offering their services for financial service products which includes common mistakes the FCA often sees firms making.

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ASA publishes ruling banning advert irresponsibly encouraging the use of credit to finance excessive spending on Christmas gifts

On 10 March 2021, the Advertising Standards Authority published a ruling banning an advert by DSG Retail Limited t/a Currys, PC World, Currys PC World deciding it had irresponsibly encouraged the use of credit to finance excessive spending on Christmas gifts.

The advert referred to a ‘buy now, pay later’ regulated credit agreement provided by Creation Consumer Finance Limited under which the consumer would pay no interest if the balance was repaid in the first six months but, if the consumer decided to pay over the agreement’s term (which was longer than 6 month), interest would be charged for the full period of the agreement (including the first 6 months). The representative APR was 24.9%.

The ASA considered “the combination of the sequence of those scenes and the voice-over statement, “Give everyone you love a little ‘oooh’ this Christmas. Buy now, pay nothing for six months” would lead viewers to understand that the dissatisfied individuals in the first part of the ad had not used or considered a ‘pay later’ method to buy or search for those items, but that the gifts shown in the second part of the ad had been purchased using the ‘pay later’ credit option with Currys PC World“.

The ASA decided that “the ad’s messaging explicitly connected the use of a form of credit with deferred payment to buying more expensive gifts, and making people’s loved ones happy with their presents at Christmas as a result“. The ASA went on to decide that “[p]articularly  in the context of the global pandemic and the associated financial difficulties for many people, we concluded the ad irresponsibly encouraged the use of credit to finance excessive spending on Christmas gifts, and was in breach” of BCAP Code rule 1.2 (responsible advertising).

The ASA ruled the advert “must not appear again in the form complained about” and adverts in the future must not “irresponsibly encourage excessive spending through the use of credit, particularly in relation to purchasing higher value Christmas gifts with a ‘pay later’ payment method“.

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ASA publishes ruling banning adverts which irresponsibly encouraged consumers to take credit by linking it with lifting or boosting mood

On 23 December 2020, the Advertising Standards Authority published a ruling banning adverts by influencers deciding they had irresponsibly encouraged customers to take credit with Klarna to pay for goods by linking that with lifting or boosting mood.

The ASA decided that “each ad promoted the use of Klarna’s deferred payment services” and the influencers had “linked buying beauty or clothing products … with enhancing their mood during an uncertain and challenging period, when many people were experiencing difficult circumstances and isolation during the lockdown, including financial concerns and mental health problems“.

The ASA also decided that one of the adverts “linked the use of Klarna with boosting one’s mood in lockdown” and “in the context of the challenging circumstances caused by the lockdown at the time, including impacts on people’s financial and mental health, the ads irresponsibly encouraged the use of credit to improve people’s mood“.

The ASA ruled the “ads must not appear again in its current form“. The ASA also told Klarna Bank AB, and the influencers, that “their future advertising must not irresponsibly encourage the use of Klarna’s deferred payment service, particularly by linking it with lifting or boosting mood“.

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HM Treasury consults on regulatory framework for the approval of financial promotions

Earlier this week, on 20 July 2020, HM Treasury published a consultation on the regulatory framework for the approval of financial promotions.

HM Treasury says that experience in recent years suggests the regime needs “additional safeguards to ensure that approval by an authorised person is a genuinely effective means of ensuring that consumers are protected from deficient or potentially harmful financial promotions“.

To strengthen the Financial Conduct Authority’s ability to ensure the approval of financial
promotions operates effectively, the Government proposes to establish a regulatory ‘gateway’, which a firm must pass through before it is able to approve the financial promotions of unauthorised firms. Any firm wishing to approve the financial promotions of unauthorised firms would therefore first need to obtain the FCA’s consent.

The deadline for responding is 12pm on 25 October 2020.

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ASA publishes decision on use of phrase “pre-approved” in a consumer credit financial promotion

Earlier today, on 6 May 2020, the UK Advertising Standards Authority published a decision on a consumer credit financial promotion involving ClearScore using the word “pre-approved” without telling the customer that further checks would be needed.

The ASA said “the average consumer would understand the term “pre-approved” in the ad to mean that they were guaranteed to get any loan or product subsequently shown to them as pre-approved when using ClearScore’s services. We noted that the pre-approved offers would be dependent on personal eligibility, subject to the customer providing the correct financial information to ClearScore, and subject to a lender’s own checks. However, there was no information in the ad to indicate that further checks would be made following a pre-approved offer, which could result in the application being declined. Because the claim “pre-approved”, in the context of the ad, was likely to be understood to mean that customers who received “pre-approved” offers would be guaranteed to get those offers, when that was not the case, we concluded that the ad breached the Code”.

The ASA told ClearScore to make sure its advertising complied with CONC and to make it clear that pre-approved offers are subject to additional checks by the lender before approval.

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Advertising Standards Authority bans a television advert which fails to mention a guarantor may be required

On 15 April 2020, the UK Advertising Standards Authority (the ASA) published a decision involving a televsion advert aimed at business borrowers which failed to say a personal guarantee may be necessary.

The ASA banned the advert saying it “disagreed with Funding Circle that it was not necessary to flag it in the ad as a possibility to applicants” and “the possibility that a personal guarantee would be required in a business loan was material information that needed to be stated in an ad“.