The Financial Conduct Authority has revealed it is investigating 227 cases of potential non-compliance with financial promotion rules, as it published findings of a review which showed many consumer credit firms are still misleading consumers.
The cases relate to products including those offered by payday loans, debt management services and credit brokers, the FCA said. It took over regulation of consumer credit in April.
A quarter of these cases relate to advertisements for high-cost short-term credit, with the FCA warning many are not “prominently displaying a risk warning or representative APR”.
Around 80 per cent of consumer credit cases to date relate to digital media, such as websites, emails and text messages. The FCA said firms need to do more to ensure that advertisements do not mislead consumers.
Since 1 April, the FCA has reviewed over 1,500 financial promotions for consumer credit products. The rules state that all promotions must be clear, fair and not misleading for consumers.
Examples of promotions which fail to meet the regulations include advertisements for fee-paying debt management firms that did not make it clear services are not free of charge, or for lenders which guaranteed they would provide credit regardless of customers’ circumstances.
A logbook lender was also providing misleading information about its APR, made unclear comparisons between its rates and those of other lenders, and implied its services were endorsed by the FCA, the regulator said.
Internet search terms that took consumers to unrelated sponsored links also came under fire. The FCA offered as an example, a search for ‘government debt help’ returned a sponsored link for a loan, “potentially misleading people to believe the firm was offering government assistance”.
Clive Adamson, FCA director of supervision, said: “It is important that all firms ensure financial promotions are fair, clear and not misleading so that customers are able to make informed decisions.
“We are disappointed to see standards fall short of what we expect, particularly in the consumer credit space, four months from when we took over regulation.
“We believe that firms in this sector can do more to ensure financial promotions meet the standards we would expect and will continue to monitor performance in this area.”
The regulator added that firms have been quick to make changes to promotions that do not adhere to standards.
