FCA warns dealers over ‘misleading’ credit adverts

Dealers are being warned to stop using misleading terms in their adverts, by the Financial Conduct Authority (FCA).

The FCA has written to almost 28,000 consumer credit firms warning them not to use terms such as “no credit check loans”, “loan guaranteed”, “pre-approved” or “no credit checks” when marketing loans.

It says adverts should not give consumers the impression that they will automatically get a loan if they apply, or that they can get a loan without the lender checking they can afford it.

Following today’s letter, the FCA said it will continue to monitor online credit advertising to check that firms are complying.

If firms fail to comply, the FCA will take action which could include banning adverts or requiring firms to change or withdraw them – or even removing a firm’s permissions to engage in regulated credit activity.

The FCA recently announced it was expanding its team in order to crack down on 'problem' firms.

Sheldon Mills, executive director of Consumers and Competition at the FCA, said:“The rising cost of living means many more consumers may find themselves in difficulty. When people are looking for a loan, it’s vital that they have the full picture about what this might mean and the risks involved - particularly if they are already in a difficult financial situation. 

“There is no excuse for adverts to make borrowing look easier or less risky than it is and they should be seeking to help customers through the cost of living crisis – not exploiting it in their marketing.”

Two firms have recently agreed with the FCA that they would make changes to their financial promotions, including the removal of phrases like “no credit check loans”. 

The move follows the introduction of new legislation designed to prevent consumers falling into “subscription traps” which see introductory offers replaced by higher cost contracts without appropriate warning.

The Competition and Markets Authority (CMA) has been given new powers by the UK Government, as part of the proposed changes.