Lenders rapped for misleading adverts

The FCA has warned lenders need to improve the standard of their adverts, as some are potentially misleading.

Lenders need to do more to ensure their adverts are up to scratch, according to the Financial Conduct Authority (FCA).

An investigation by the regulator found that one in five adverts for consumer credit, such as payday loans, fell short of the regulator’s expectations and had the potential to mislead potential borrowers.

What lenders are doing wrong

The regulator’s rules state that all adverts and promotions must be clear, fair and not misleading.

The FCA examined more than 500 adverts for a range of different credit products after it took over regulation of the sector at the beginning of April. And it found many examples where key information was either missing or difficult to find.

For example, the regulator identified a number of examples where people were encouraged to hit the ‘apply’ button for a product before they were presented with important information, which is against the rules.

Other failings included:

• claiming that the product would help repair credit ratings;
• claiming it would clear a customer’s debt, when in fact it is just substituting one debt for another;
• targeting young people with promotions (including branded colouring-in sheets) for products that people must be over the age of 18 to use.

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What happens next?

A total of 108 adverts were identified as not meeting the rules. As the table below demonstrates, payday loans were the worst performers, with the FCA highlighting some common problems, such as a lack of risk warning and playing down the importance of the APR.

Debt management also performed poorly. The FCA identified adverts which were not clear (and even misleading) about benefitting from lower monthly payments.

Of the 108 promotions identified as being potentially misleading, 75 have been amended or withdrawn. The remaining firms are in the process of responding, according to the FCA.

What do you think? Are consumer credit promotions clear enough? What should the punishment be for adverts that don’t meet the rules? Let us know in the Comments box below.

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