Legal issues for the UK consumer finance industry
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“.
On 26 November 2019, the UK Financial Conduct Authority published a new webpage and guidance for firms approving financial promotions of unauthorised firms. The guidance claims to be setting out “some practical implications of our existing requirements, rather than setting out new standards”. The FCA flags it has particular concerns over ‘mini bonds’.
This webpage follows the FCA decision to issue a ‘Dear CEO’ letter to firms in April 2019.
On 11 April 2019, the UK Financial Conduct authority published a ‘Dear CEO’ letter to firms approving financial promtions. This letter is aimed at firms approving financial promotions for unauthorised firms.
The FCA reminds firms:
– Before approving a financial promotion for an unauthorised firm, the authorised firm must ensure the promotion complies;
– Despite its earlier letter dated 9 January 2019, the FCA has found “a number of examples where it appears the due diligence carried out on a financial promotion may have fallen well short of the standard we expect”.
– The approver of a restricted financial promotion (ie one which can only be sent to certain persons) must ensure any restriction is complied with (and express reference is made to mini-bonds)
– Firms not complying are reminded of the FCA’s extensive enforcement toolkit.
On 20 March 2019, the Advertising Standards Agency (the ASA) published a decision deciding an advertising email sent by Cash On Go Limited t/a Peachy.co.uk was irresponsible by saying “… no one really knows what’s going on with this whole Brexit malarkey … and some say it could affect the amount of food available … We do not want to believe that Brexit will impact the amount of food available but it’s still a good idea to have a little stockpile ready. That way you’re always prepared for the worst … Things can pop up even when you think everything is going swimmingly … That’s when you might need a little extra help“.
The ASA acknowledge the email used “a light hearted tone“, “did not use definitive language regarding the future” and “concluded that credit decisions should be made after careful consideration“. However, it considered the overall approach was likely to put “emotional pressure on readers” so they would “go further than they would otherwise have been able to afford by taking out a loan and that, if they did not, they risked being unable to feed themselves or their families“.
This is another robust decision by the ASA – it is starting to be increasingly more difficult to publish complaint financial promotions.