Compliance

UK Regulator Not Entirely Happy About Firms' Observance Of Advertising Rules

Radhika Badiani, 14 August 2014

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Promotions for financial products are still falling short of rules to protect consumers and firms need to do more to ensure that advertisements do not mislead, the UK financial regulator said.

Promotions for financial products are still falling short of rules to protect consumers and firms need to do more to ensure that advertisements do not mislead, the UK financial regulator said.

The Financial Conduct Authority reviewed 1,500 promotions for consumer credit products.

While not explicitly referring to wealth management, the findings are likely to remind the industry of a need to avoid falling into regulatory trouble.

Since 1 April this year, the FCA has opened 227 cases about non-compliant promotions for products such as payday loans, debt management services and credit brokers. A quarter of these cases relate to advertisements for high-cost short term-credit, with many not prominently displaying a risk warning or representative APR, according to a statement by the FCA.  80 per cent of consumer credit cases relate to digital media, such as websites, emails and text messages.

Some examples of financial promotions failing FCA regulations include advertisements for fee-paying debt management firms that did not make it clear that services are not free of charge; promotions that guaranteed firms would provide credit regardless of customers' circumstances; a logbook lender who provided misleading information about its APR and implied its services were endorsed by the FCA; internet search terms that took consumers to unrelated links.

The FCA declined to comment on the names of firms involved in the review.

In a related matter, the watchdog recently published  a guidance consultation paper that reinforced its stance on social media financial product promotion rules, stating that all communications need to be "media-neutral" and even suggested the use of "#ad" for character- limited sites such as twitter, in order to reduce customer risk.

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