On 6 May 2022, the FCA published a Dear CEO letter to consumer credit firms (firms) reminding them that they have a responsibility to ensure that they do not exploit the cost of living crisis to promote their services.
The Dear CEO letter:
- States that the FCA has identified a number of financial promotions whereby firms include phrases such as ‘no credit check loans’, ‘loan guaranteed’, ‘pre-approved’ or ‘no credit checks’.
- Reminds credit brokers that whilst they may not conduct a creditworthiness assessment, the FCA is concerned that consumers could be led to believe that the lender will make no checks on credit status, whether with a credit reference agency or by other means.
- Reminds firms of the requirements located in the following sections of the Consumer Credit sourcebook (CONC) – CONC 3.1.1R, 3.3.3R, 3.3.4G(2), 3.3.3R and 5. In particular, CONC 3.3.3R states ‘a firm must not in a financial promotion or a communication to a customer state or imply that credit is available regardless of the customer’s financial circumstances or status’.
- Refers to promotions offering brokerage/direct lending services for high-cost short-term credit which have failed to specify the required risk warning ‘Warning: Late repayment can cause you serious money problems. For help go to moneyhelper.org.uk’. Where such a risk warning is missing it will render the promotion in breach of CONC 3.4.1R. Firms are reminded of the exclusion in CONC 3.1.7R where an advert would not trigger the need for a risk warning.
- Notes that the FCA is aware that some advertising media might appear to pose challenges for firms in meeting its requirements. However, the FCA’s rules are in general media neutral, and the regulator considers that it is possible to comply, despite character limitations. Therefore, the FCA expects firms to include the warning, using the MoneyHelper logo if necessary. However, on platforms which do not accept the use of logos, it would be unlikely to be a supervisory priority for the FCA if the text omitted ‘you’ or replaced ‘go to’ with ‘see’.
- Notes that some promotions fail to include the Representative APR (RAPR) and that the circumstances where the RAPR is required is explained in CONC 3.5.7R and CONC 3.5.8G.
- Reminds firms that in the FCA’s rules the RAPR is defined as an ‘APR at or below which the firm communicating or approving the financial promotion reasonably expects, at the date on which the promotion is communicated or approved, that credit would be provided under at least 51% of the credit agreements which will be entered into as a result of the promotion’.
- Mentions that the FCA has identified promotions by credit brokers which fail to state that they are brokers and not lenders as required by CONC 3.7.7R.
- Reminds firms of the need to comply with the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing administered by the Advertising Standards Authority.
In addition, the Dear CEO letter states that firms should consider conducting a review of their processes and systems and controls for financial promotions, to determine whether they are sufficiently robust in order to comply with CONC 3. This includes oversight of appointed representatives/introducers appointed representatives and marketing across all media platforms. The Dear CEO letter should also be drawn to the attention of firms’ boards.
The FCA intends to proactively monitor the market to assess compliance with its rules.