Consumer credit firms must raise advertising standards, says FCA

[Legal Beagles]

Credit firms need to do more to ensure their adverts and promotions do not mislead potential customers. The findings come as Financial Conduct Authority (FCA) statistics show that one in five adverts from consumer credit firms, for products including payday loans, fell short of the FCA’s financial promotion expectations – although most firms were quick […]

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[Amethyst]

Re: Consumer credit firms must raise advertising standards, says FCA

Themes across sectors, included:
High cost short term credit (payday loans)

• Lack of or prominence of risk warning:
  “warning: late repayment can cause you serious money problems. For help, go to: moneyadviceservice.org.uk”
• Fee for credit broking services either missing or buried in the terms & conditions
• Play down the importance of the annual percentage rate (APR) in an attempt to explain the reason why the APR is so high. The APR enables consumers to compare one product or provider with another in relation to the cost of taking out the credit.
• Lack of or prominence of a representative APR
• Focus on the benefits or the loan and no explanation of the downsides/risks of non-repayment.

Debt management

• Lack of clarity/being misleading about lower monthly payments: no indication that (where debt is rescheduled) lower payments may increase the loan, or its term; or are due to relief from charges
• Misleading statements about the firm’s ability to freeze interest and charges of lenders.

Home-collected credit (HCC)

• Misleading explanation of the higher APRs for HCC: suggesting that banks leave out certain charges from their APR calculations, when this is not required in the calculation of an APR
• Suggesting HCC providers offer loans to credit-impaired customers, whereas banks do not – this is not necessarily the case
• In one case, cherry-picking the representative example information to play down the less positive features i.e. APR and interest rate.

Log book loans

• Lack of clarity/prominence on the point that a customer would lose ownership of a car, and it may be repossessed if they fall behind with payment.

Motor finance

• Referring to a monthly repayment but not being clear about what type of credit it is. For example, some are rental rather than ownership.

Pawn broking

• Firms not being clear enough that their goods serve as a security and what might happen if a repayment is not made
• Firms not including the representative APR / representative example.

Read more at: http://legalbeagles.info/consumer-cr...#ixzz31rqHGk00

[orfoster]

Re: Consumer credit firms must raise advertising standards, says FCA

I've submitted an FOI today for the background from the FCA.