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 to make changes once the shortcomings were pointed out.
The rules state that any advert must be clear, fair and not misleading for consumers. The FCA examined over 500 advertisements for a range of consumer credit products after assuming responsibility for the sector on April 1 and found a number of examples where key information which should have been included in the advertisement was either missing or difficult to find.
Clive Adamson, director of supervision at the FCA, said: “It is particularly important in this sector that advertisements for financial products enable customers to make informed decisions. We think that more can be done to ensure that advertisements are fair, clear and not misleading.
“Firms have responded well when challenged about ads which have not met the standards. We will continue to work with firms and monitor their performance in this area to ensure the high standards we are looking for are met'.”
The FCA found examples where consumers were encouraged to hit the ‘apply’ button for a product before having a chance to access important information, a tactic which is against its rules.
Other examples which did not meet the regulations included firms targeting young audiences with promotions for products that consumers must be over the age of 18 to use, such as distributing branded colouring-in sheets with their pamphlets for high-cost, short-term loans; claiming that their product would help repair credit ratings; claiming a product will clear a customer’s debt, when in fact it is just substituting one debt for another.
In total, 108 promotions were identified as not meeting the rules with examples of poor advertising across all mediums including print, online, in-store and direct mail.
Of the 108, 75 firms have responded, all of whom have amended or withdrawn multiple promotions. The remaining firms are in the process of responding.
The FCA will continue to monitor these promotions and will be working with firms to help them comply with the rules and improve standards to the benefit of consumers.
The FCA also acts on complaints received from the public and via the Advertising Standards Authority.