RegulationAug 28 2014

Financial promotions must improve, says FCA

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Clive Adamson has said he is “disappointed” to see the standards of financial promotion “fall short” of the FCA’s expectations.

A total of 227 cases have been opened since 1 April of consumer credit products that failed to meet the FCA’s standards.

Mr Adamson (pictured), the regulator’s 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 FCA said it had reviewed more than 1,500 financial promotions for consumer credit products since 1 April and opened 227 cases about non-compliant promotions for products, such as payday loans, debt management services and credit brokers.

A quarter of these related to adverts for high-cost, short-term credit, with many not prominently displaying a risk warning or representative APR.

Roughly 80 per cent of consumer credit cases are related to digital media such as websites, emails and text messages.

The regulator has already focused on social media with its recently released 15-page guidance paper, Social Media and Customer Communications.

Background

The Financial Services Compensation Scheme has begun to offer compensation to consumers who have fallen victim to one of 50 firms declared in default by the FSCS.

Mark Oakes, head of communications at FSCS, said the scheme “was established to protect consumers when authorised financial services firms go bust”.

He urged consumers who feel they are entitled to compensation to contact the FSCS.

Adviser view

Claire Walsh, chartered financial planner for Brighton-based Aspect 8, said: “It’s a shame, and it’s a good thing that the regulator is picking up on it and trying to rein it in. People are usually confused about adverts, and some people don’t know what things like APR mean.”