News Update: FCA Warns Firms Over Misleading Credit Promotional Activity

DATE: MON 6TH MAY 2022 | AUTHOR: Tara Williams, Chief Risk & Compliance Officer

In a press release, published on May 6th, the FCA announced that 28,000 letters had been sent to CEOs at almost 28,000 regulated firms titled; Action needed to ensure your financial promotions are clear, fair and not misleading.

The message was stark, stop using misleading terms across all forms of advertising and promotion, including digital/social platforms or face regulatory action.

While the letter warned the firms to avoid using terms such as “no credit check loans”, “loan guaranteed”, “pre-approved” or “no credit checks” when marketing loans, it also extended the scope to draw firms’ attention to potential weaknesses in other areas. I was struck by the references to the Representative APR (RAPR) in financial promotions, an issue which we regularly see in the market and that appears to be missed much more often than Representative Examples as firms fail to understand the difference.

The regulator noted;

“Some promotions fail to include the Representative APR (RAPR). The circumstances where the RAPR is required are explained in CONC 3.5.7R and CONC 3.5.8G. An RAPR is triggered when a promotion states or implies that credit is available to individuals who might otherwise consider their access to credit restricted, includes a favourable comparison relating to the credit with another person, product or service or an incentive to apply for credit or enter into a credit agreement (for example, speed or ease of access). You are reminded that the RAPR is defined in our rules as an ‘APR at or below which the firm communicating or approving the financial promotion reasonably expects, at the date on which the promotion is communicated or approved, that credit would be provided under at least 51% of the credit agreements which will be entered into as a result of the promotion.”

It raised an issue that dealers must not overlook; ensuring the RAPRs are used if triggered and that the RAPR used complies with the 51% requirement, something only they, rather than their lenders, are likely to know.

To conclude I am going to quote, and agree with, the FCA’s recommendation as a course of action for all dealers;

“You should consider conducting a review of your processes and systems and controls for financial promotions, to determine whether they are sufficiently robust in order to comply with CONC 3. This includes oversight of your appointed representatives/introducer appointed representatives and marketing across all media platforms such as: websites, paid for Google ads and social media sites such as TikTok and Instagram. We recommend a record of this review is retained.”

If you need help;

From many years of experience helping dealers of all sizes, I know that compliance with FCA requirements can be challenging for dealers, getting the detail right and finding the time to get the required process and controls in place. I can say with some confidence that things will not get any easier.

The regulator is set to report on its assessment of the impact of last year’s ban on discretionary commission; in July, it will finalise its plans for the forthcoming Consumer Duty, an overhaul of the Appointed Representative regime has been announced, and now, as its recent action on financial promotional activity reveals, it is moving to protect consumers in the face of rising inflation.

If you need help, don’t hesitate to get in touch with us at iComply, we have many years of dealer compliance experience, including working retail side ourselves, and we are well backed and resourced to help.

Call us on 01279 456545 or email us at info@i-comply-online.co.uk; we are ready when you are.

Sources

• https://www.fca.org.uk/publication/correspondence/dear-ceo-ensure-your-financial-promotions-clear-fair-not-misleading.pdf

• https://www.fca.org.uk/news/press-releases/fca-warns-businesses-stop-misleading-credit-adverts-protect-consumers

• https://www.handbook.fca.org.uk/handbook/CONC/3.pdf