With the rising cost of living and the impact it is beginning to have on our finances, it is imperative that businesses offering credit to their customers are clear about the costs and risks involved in taking out a loan to pay for goods. Customers are now more likely than ever before to make a decision to take out a loan to spread the cost of a purchase and avoid a significant lump sum payment without considering the impact of their loan repayments in the coming months or years, or the total amount they will end up paying.
The Financial Conduct Authority ("FCA") has recently been focused on the way that firms advertising finance are helping their customers understand these costs, and the way in which the financial product will work. In 2021, FCA interventions resulted in 564 financial promotions being amended or withdrawn across the whole financial services industry, due to non-compliance with their rules. 77% of these were online or social media adverts.
Of these amendments, 40% of them were in the retail lending sector - the highest number of interventions across the whole financial sector. This means that the FCA will be targeting their pro-active supervision towards online advertising in the retail lender sector.
We have already seen a 'Dear CEO' letter issued by the FCA to all authorised firms with credit broking permissions and high cost credit firms. You may have received this too if your company holds limited permissions with the FCA for credit broking. In the letter, the FCA calls out examples of adverts they've seen which breach their rules and mislead customers, using phrases such as:
- "No credit check"
- "Guaranteed loan"
They also highlight that a number of adverts they have seen did not include the Representative APR, or where necessary, the Representative Example. Adverts that imply credit is available to individuals who might consider their access to credit restricted, use a favourable comparison or incentive to apply such as speed or ease of application, must include a Representative APR. The Representative APR is the APR we expect at least 51% of your customers to be offered if their application for credit is accepted.
Promotions about interest bearing finance, or interest bearing finance that includes a promotional 0% offer, which state a monthly payment amount, or any other aspect of the cost of credit, must include a full Representative Example. The Representative Example is based on the Representative APR, but includes all of the information about the finance product that we expect the majority of customers to be offered:
As credit brokers, it is also important that we include a ‘credit brokerage disclosure’ in our adverts to ensure customers understand the nature of the service we are providing. Our Integration expert or your Account Manager can help you get this disclosure right.
It is our duty to our customers to ensure we meet these rules when advertising and promoting finance. If you have placed any banners on your website, or produced any promotional materials for your store that you have not shared with Deko, please send them over to email@example.com and we will help you to make sure they meet the rules.
As a reminder, all financial promotions must be approved by Deko before they are used on your website or in store. Where we provide you with templates to use on your website, such as finance pages, you should not amend or add your own content unless specifically instructed to do so.
By working together, we can achieve great outcomes for our mutual customers and help them to buy the things they love with affordable and sustainable finance that suits their needs.