FCA warns businesses to stop misleading credit adverts

May 11, 2022 12:00:00 AM

What has happened?

In its Dear CEO letter issued in May 2022, the FCA has warned lenders and credit brokers to stop using misleading terms in their advertising or face regulatory action.

What are the key points of the Dear CEO letter?

The FCA has written to almost 28,000 consumer credit firms (specifically, credit brokers and firms providing high-cost lending products), warning them that the provision of a risk warning in their promotions is mandatory and that they should not use terms such as ‘no credit check loans’, ‘loan guaranteed’, ‘pre-approved’ or ‘no credit checks’ when marketing loans. Firms’ promotions should not give consumers the impression that they will automatically be granted a loan if they apply, or that they can get a loan without the lender checking that they can afford it.

In addition, the letter reminds firms of the need to comply with the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (the CAP Code)1 administered by the Advertising Standards Authority (ASA). The ASA previously published advice about short-term and payday loans, which emphasised that ‘because short-term loans are often aimed at potentially vulnerable consumers, marketers should be particularly careful to ensure that marketing for high-interest, short-term loans is socially responsible. When assessing ads, the ASA is likely to consider issues such as the undue emphasis on speed and ease of access, the targeting of vulnerable groups and whether the ad could be seen to trivialise taking out a loan’.

1 see https://www.asa.org.uk/codes-and-rulings/advertising-codes/non-broadcast-code.html

The FCA has undertaken that it will continue to monitor online credit advertising to check that firms are complying. If they fail to comply, the FCA has undertaken to take action, which could include banning promotions or requiring firms to change or withdraw them – or even removing a firm’s permissions to engage in regulated credit activity.

The FCA has set out plans to protect and support consumers in consumer credit markets, and its recently announced three-year strategy includes a focus on driving up standards and making firms put consumers’ needs first.

How can we help you?

If you’d like to know more about how we can help you with your credit financial promotions arrangements (including social media usage), your implementation of the new Consumer Duty, or any other regulatory compliance issues, our specialist team is here to help.

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