guidance on credit advertising - actsmart...guidance on credit advertising this guide is issued on...
TRANSCRIPT
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Guidance on
Credit Advertising This guide is issued on the explicit understanding that it
should not be regarded as legal advice or taken to be an
authoritative view of the law. The guide includes extracts
from the BIS Consumer Credit Directive Guidelines.
As an authorised entity each retailer has responsibility to
ensure all financial promotions are compliant with the law.
V12 Retail Finance Ltd does not accept any responsibility
for the legal accuracy of any information included in this
guide.
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02Guidance on Credit Advertising
201408-002
Guidance on Credit Advertising
Contents
Guidance on Credit Advertising
Where can I obtain official information on Credit Advertising and the CCA? 03
General Requirements 04
In Practice 06
What is the ‘standard information’? 07
What is a ‘Trigger’? 08
What is an ‘Incentive’? 08
When do I need to display the representative example? 08
Do I need to display a representative example on a 0% advert? 09
When do you need to display the representative APR alone? 09
What does ‘Prominence’ mean? 10
What does ‘Equal Prominence’ mean? 10
Which “representative APR” can I display? 11
How should I display the representative APR? 11
What are the consequences of failing to comply with the Regulations? 11
Examples of Credit Advertising
Introduction 13
How to Market Finance in Print Advertising
• ‘Triggering’ APR Only 14
• Advert – Without ‘Trigger’ 15
• Multi Product Catalogue Pages 16
How to Market Finance on eCommerce Stores
• Product Category Page 17
• Product Info Page 18
• Product Page 20
• Product Category Page 22
• Product Info Page 1 24
• Product Info Page 2 25
Guidance on Credit Advertising
How can I use Low Rate and Fixed Classic Credit to increase sales and reduce
average subsidies? 26
Online Credit Marketing Checklist 26
How can I maximise acceptance rates? 27
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03Guidance on Credit Advertising
201408-002
Guidance on
Credit Advertising
Control over consumer credit advertising is now within the Financial Services and Markets Act
2000 (“FSMA”). Under FSMA the Financial Conduct Authority (the “FCA”) is now responsible
for consumer credit regulation. The FCA has created a new rulebook called the Consumer
Credit sourcebook (known as the “Sourcebook” or “CONC”) that details requirements that
must be complied with by providers and introducers of credit. Chapter 3 of the Sourcebook,
which is entitled “Financial promotions and communications with customers”, lays down
advertising rules for the advertising of all credit products regulated by the Consumer Credit Act
1974 (the “CCA”). This easy reference guide aims to help retailers formulate their marketing
activities both online and in print, in order to comply with the rules detailed in chapter 3 of the
Sourcebook. The Sourcebook applies to adverts across all types of media, and typically refers
to adverts as financial promotions.
Where can I obtain official information on Credit Advertising and the CCA?
Financial promotions of retail finance are subject to a variety of laws and other rules in
addition to the Sourcebook (such as under the CAP Code and the Consumer Protection
From Unfair Trading Regulations 2008 (“CPRs”)). The FCA’s Sourcebook can currently be
found in the FCA’s Policy Statement PS14/13 using the link below:
http://www.fca.org.uk/static/documents/policy-statements/ps14-03.pdf
From 1 April 2014 the Sourcebook will be part of the FCA’s overall Handbook which can be
accessed using the following link:
http://fshandbook.info/FS/html/FCA
The Consumer Credit Act 1974 can be found using the following link, but be aware that many
sections have now been revoked following the FCA assuming responsibility for the regulation
of consumer credit activities:
http://www.legislation.gov.uk/ukpga/1974/39
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04Guidance on Credit Advertising
201408-002
Guidance on
Credit Advertising
General Requirements
• Advertisers must ensure that the advert uses easy to understand language and is not
misleading. The CPRs and CAP Code require all claims made in adverts to be capable
of being objectively substantiated and any customer testimonials must be genuine.
• If the advert contains any triggers (as set out on page 8), other information about the finance
offer must also be displayed - referred to as the “representative example” and should
include all of the relevant information, required under Chapter 3 of the Sourcebook,
known as the ‘standard information’. This information is set out in full in the “What is the
‘standard information’?” section of this guidance.
• All of the standard information must be given equal prominence relative to each other,
displayed together and given greater prominence relative to:
a) any other information relating to the cost of credit;
b) any incentive, which can include, but is not limited to, either
a. gifts, special offers, discounts and rewards; or
b. a statement about the speed or ease of
i. processing;
ii. considering or granting an application; or
iii. making funds available (eg. within 24 hours of the application);
c) any comparative indicator, ie. where the terms on which credit is available, or
the way in which the credit is offered, is more favourable than either:
a. other offers from that provider; or
b. offers from other lenders.
• In other words, you can’t ‘hide’ details of the finance offer in the small text. In addition,
you should not repeat any items of standard information (such as the monthly payment)
outside of the representative example and afford them greater prominence than the
remainder of the information. This is known as ‘cherry picking’ of information and
is prohibited under the Sourcebook as it would mean that one or more items have
been given greater prominence, rather than the equal prominence required.
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05Guidance on Credit Advertising
201408-002
Guidance on
Credit Advertising
General Requirements (continued)
• All adverts offering credit must include the name of the advertiser, as shown on the
FCA’s Financial Services Register. Under the Sourcebook, the ‘advertiser’ is the person
who is identified in the advert as the person who is willing to enter into the transactions
advertised. This may be the retailer, the lender or both.
• The full postal address of the advertiser must also be shown on all material which
displays a rate of interest or an amount relating to the cost of credit (except in relation
to television or radio adverts or any point of sale material which remains on the premises
of the retailer).
• In addition, the Sourcebook requires that the extent of a retailer’s independence and in
particular whether it works exclusively with one or more lenders or works independently,
be shown on its advertising material. Therefore, one of the following alternative forms of
wording must be included in all adverts (it can form part of the small print as there are no
specific prominence requirements):
o “(Retailer Name) acts as a credit broker and only offers credit products for Secure
Trust Bank PLC trading as V12 Retail Finance Ltd, or Credit is provided by external
finance companies as determined by (Retailer Name).”
• All adverts must include an appropriate statutory status disclosure as required by the
FCA’s General Provisions sourcebook. Such disclosure should state the nature of
the authorisation and regulation of the company concerned, eg. “Company X is
authorised and regulated by the Financial Conduct Authority.”
• It is also important to include some standard small print explaining that finance will only
be given subject to status. We suggest “Credit provided subject to age and status.”
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06Guidance on Credit Advertising
201408-002
Guidance on
Credit Advertising
In Practice
Our advice is to always include the following information in all of your credit advertising and web
pages:
• Your full business name and full postal address
• The required statutory status disclosure
• Text explaining that finance is subject to status
• Text (which can be in the small print) which explains the extent of your independence
and whether or not you are tied to one or more providers, such as V12 Retail Finance
Here’s an example:
Tri Electric is registered in England and Wales 12345678. Registered office: 1 The Street,
Anytown, Wessex WED 5LT. Tri Electric acts as a credit broker and only offers credit
products from Secure Trust Bank PLC trading as V12 Retail Finance. Tri Electric is
authorised and regulated by the Financial Conduct Authority. Our registration number is
123456. Credit provided subject to age and status.
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07Guidance on Credit Advertising
201408-002
Guidance on
Credit Advertising
What is the ‘standard information’?
The ‘standard information’ in a representative finance example, as detailed in chapter 3 of the
Sourcebook, must include the following:
(a) the rate of interest, and whether it is fixed or variable or both, expressed as a fixed or
variable percentage applied on an annual basis to the amount of credit drawn down;
(b) the nature and amount of any other charge included in the total charge for credit;
(c) the total amount of credit;
(d) the representative APR;
(e) in the case of credit in the form of a deferred payment for specific goods, services, land
or other things, the cash price and the amount of any advance payment;
(f) the duration of the agreement;
(g) the total amount payable; and
(h) the amount of each repayment of credit.
This information can be displayed in a table or in sentence form, providing it is easy to understand
and all items are given equal prominence relative to each other. The representative example as
a whole should be given greater prominence than any incentives to take credit, any comparative
indicators that credit is available on better terms than elsewhere, any reference to poor credit
history and any other information relating to the cost of credit. The purpose of the ‘standard
information’ is to ensure that important information concerning the cost of the credit can be
viewed together as a whole, meaning that the borrower can assess the suitability and affordability
of the offer. Below is an example of the ‘standard information’ presented in a table:
Representative Example
Purchase Price £1,399.00 Total Repayable £1596.36
Deposit £399.00 Duration of Agreement 24 months
Amount of Credit £1,000.00 Rate of Interest (Fixed) 9.8% pa
24 Monthly Payments £49.89 19.5% APR Representative
Tri Electric is registered in England and Wales 12345678. Registered office: 1 The Street, Anytown, Wessex WED 5LT. Tri Electric acts
as a credit broker and only offers credit products from Secure Trust Bank PLC trading as V12 Retail Finance. Tri Electric is authorised
and regulated by the Financial Conduct Authority. Our registration number is 123456. Credit provided subject to age and status.
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08Guidance on Credit Advertising
201408-002
Guidance on
Credit Advertising
What is a ‘Trigger’?
In this guidance, when we refer to a “trigger” we mean a piece of information which, when included
in the advert, means that either the representative example or the representative APR must also
be included. We set out on this page what the ‘triggers’ for both the representative example and
the representative APR are. For example you can’t show a monthly repayment without displaying
the ‘standard information’ which illustrates all items of the finance offer and you cannot afford the
monthly repayment greater prominence than the ‘standard information’.
What is an ‘Incentive’?
An incentive can include statements such as:
• 5% cashback
• No fee loans
• No deposit required
• Low interest rates
• Get a free gift
• Quick decision
• Decision in minutes
• Fast application
• Fast payment
• Money in 24 hours
Please note that this is not a comprehensive list and the FCA may handle issues with interpretation
of an incentive on a case by case basis.
When do I need to display the representative example?
Where the advert includes an interest rate or any amount relating to the cost of the credit, then a
representative example of the credit (standard information) on offer must also be included on the
advert as must the postal address.
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09Guidance on Credit Advertising
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Guidance on
Credit Advertising
When do I need to display the representative example? (Continued)
Retailers can also refer to the guidance issued by the Department of Business, Innovation and
Skills (the “BIS Guidance”). While the regulatory landscape has changed significantly since this
guidance was issued it still contains useful guidance in relation to consumer credit advertising.
Please refer to section 6.7 (Advertising) of the guidance using the link below:
http://www.bis.gov.uk/assets/biscore/consumer-issues/docs/c/10-1053-consumer-credit-
directive-guidance.pdf
BIS also have a Quick Start guide which can be downloaded here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31904/10-
1072-consumer-credit-directive-quick-guide.pdf
Do I need to display a representative example on a 0% advert?
Chapter 3 of the Sourcebook provides that any reference to an interest rate in an advert, including
0% credit, will act as a ‘trigger’ which means that the ‘standard information’ must also be shown.
When do you need to display the representative APR alone? Whenever the representative example is displayed, the representative APR must be included as
part of the standard information. However, even where the representative example is not triggered,
the representative APR will itself be triggered by the inclusion of any incentive, comparative
indicator or reference to poor credit history. In such circumstances, the representative APR should
be afforded greater prominence in the advert than any such incentive, comparative indicator or
reference to poor credit history.
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10Guidance on Credit Advertising
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Guidance on
Credit Advertising
When do you need to display the representative APR alone? (Continued)
The representative APR is itself a ‘rate of interest’ which would, on the face of it, appear to trigger
the requirement to include a representative example. However, where a representative APR is
included in an advert only because it has itself been triggered by the inclusion of an incentive,
comparative indicator or reference to poor credit history, the representative APR will not trigger
the displaying of a representative example.
See page 14 of this guide for an example.
What does ‘Prominence’ mean?
The prominence of the ‘representative example’ needs be assessed in the context of the advert
as a whole.
The Regulations do not state that this needs to be of a particular font size or position. But the
representative example must be more prominent (by way of larger font size, distinguishable colour
or some other method) from the trigger information.
What does ‘Equal Prominence’ mean?
The ‘standard information’ can be displayed in a table or in sentence form, providing it is easy to
understand and all items are given equal prominence to each other.
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11Guidance on Credit Advertising
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Guidance on
Credit Advertising
Which “representative APR” can I display?
A retailer may offer various finance deals at various different interest rates. It is permissible
to display specific products at different individual APRs, but each advert must have only one
‘representative APR’. The ‘representative APR’ is the APR rate at or below which the advertiser
reasonably expects to write at least 51% of the deals he will enter into as a result of the advert.
How should I display the representative APR?
Examples: “15.9% APR representative” or “representative 15.9% APR”. The prominence rules
apply to the “15.9% APR” and this part of the representative APR citation cannot be displayed in
any other way, such as “APR 15.9%”.
What are the consequences of failing to comply with the Regulations?
Under FSMA it is a criminal offence for anyone to carry out a regulated activity, including consumer
credit activities, unless they are either an authorised person or an exempt person. This is known
as the ‘general prohibition’. Furthermore, a person cannot carry out financial promotions unless:
(i) they are an authorised person or (ii) the content of the financial promotion is approved by an
authorised person. Only an authorised person can approve the content of a financial promotion.
It is also an offence under the CPRs for any such marketing material to convey information which
is false or misleading. The FCA may take such failures into account when considering whether to
issue, renew, vary, suspend or revoke a firm’s permission to carry out consumer credit activities.
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12Guidance on Credit Advertising
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Guidance on
Credit Advertising
What are the consequences of failing to comply with the Regulations? (Continued) In addition to the criminal sanctions set out above, there is also a clear risk of reputational damage
occurring if the regulatory bodies take action for breaching the advertising rules and the financial
cost of having to replace or cease advertising campaigns can be huge. Also, unless a firm takes
reasonable steps to ensure that a communication or financial promotion is clear, fair and not
misleading, a consumer could have a right of action under Section 138D of FSMA. The firm could
also be subject to regulatory sanction for breach of the Sourcebook which explicitly requires firms
to be clear, fair and not misleading.
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13Guidance on Credit Advertising
201408-002
Examples of
Credit Advertising
This section gives practical examples of:
Non Compliant Finance Marketing Examples of non-compliant advertising and web pages
Compliant Finance Marketing Examples of compliant advertising and web pages
Compliant
Non Compliant
The examples in this section assume that you will not add in additional text that includes
any further information about credit. If you were to do so, you could be inadvertently
‘cherry picking’ parts of the offer by making them more prominent.
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14Guidance on Credit Advertising
201408-002
How to Market Finance in
Print Advertising
Examples of Credit Advertising
Example: ‘Triggering’ APR Only
Compliant
Advertiser’s name and address and the statutory status disclosure
must be shown but no need to include the ‘Standard Information’.
This incentive to
purchase the product
on finance ‘triggers’ the
APR representative rate
but NOT the full standard
information.
The Representative APR
should be given greater
prominence than the
incentive.
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15Guidance on Credit Advertising
201408-002
How to Market Finance in
Print Advertising
Examples of Credit Advertising
Example: Advert – Without ‘Trigger’
Compliant
Advertiser’s name and address and the statutory status disclosure
must be shown but no need to include the ‘Standard Information’.
‘Finance available’ and
‘regular’ payments are
examples of statements
which can be used
without triggering the
standard information.
If you advertise that
finance is available, then
you must disclose your
independence to the
lender.
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16Guidance on Credit Advertising
201408-002
How to Market Finance in
Print Advertising
Examples of Credit Advertising
Example: Multi Product Catalogue Pages
The Bicycle Co. is registered in England and Wales 12345678. Registered office: 1
The Street, Anytown, Wessex WS15 415. The Bicycle Co. acts as a credit broker and only offers
credit products from Secure Trust Bank PLC trading as V12 Retail Finance. The Bicycle Co. is authorised and regulated by the
Financial Conduct Authority. Our registration number is 123456. Credit provided subject to age and status.
Where there are multiple products on a page, it may be
impractical to show a finance illustration next to each
product. If this is the case a single “Representative Example”
of the ‘standard information’ may be shown. It is possible to
show different APRs for products, but one ‘representative
example’ must be shown and more prominently.
A single representative example showing all aspects of the
finance offer is shown which ‘covers’ all the products on the
page. The goods chosen as the basis for the representative
example should themselves be representative of the goods
the retailer sells.
Large ‘call-out’ box for
the finance offer.
Compliant
Representative ExamplePurchase Price £1,975.00
Deposit £395.00
Amount of Credit £1,580.00
24 Monthly Payments £78.84
Total Repayable £2287.16
Agreement Duration 24 months
Rate of Interest (Fixed) 9.8% pa
19.5% APR Representative
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17Guidance on Credit Advertising
201408-002
How to Market Finance on
eCommerce Stores
Examples of Credit Advertising
Example: Product Category Page
Compliant
This example uses a ‘click and reveal’
technique which can be achieved using
Javascript. When the customer clicks for more
info a ‘representative example’ is shown.
Strong ‘call to action’ highlighting
that finance is available.
...a ‘representative example’.
Highlights the finance is available on product.
User clicks to reveal…
Advertiser’s name and address and the statutory status
disclosure must be shown somewhere on the main page.
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18Guidance on Credit Advertising
201408-002
How to Market Finance on
eCommerce Stores
Examples of Credit Advertising
Example: Product Info Page
Compliant
If you want to show an interest
rate or monthly payment, this acts
as ‘trigger’ which means that…
A representative example with
ALL of the ‘standard information’
must be shown.
All finance details must be
of equal prominence and the
representative example must also
be more prominent than any other
credit cost Information or APR
‘trigger’.
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19Guidance on Credit Advertising
201408-002
How to Market Finance on
eCommerce Stores
Examples of Credit Advertising
Example: Product PageNon Compliant
You can’t ‘Cherry Pick’
parts of the ‘standard
information’.
You can’t display weekly
repayments.
And you can’t give them
more prominence on the
page.
‘Standard Information’
incomplete and not given
enough prominence.
Advertiser’s address not shown and statutory status disclosure.
Small print missing. If you advertise that finance is available, then
you must disclose your independence to the lender
We have identified several key reasons
why this is non compliant, there may be
more!
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20Guidance on Credit Advertising
201408-002
How to Market Finance on
eCommerce Stores
Examples of Credit Advertising
Example: Product Page
Weekly repayments cannot be
shown as V12 Retail Finance
only collect monthly, plus you
can’t ‘cherry pick’ parts of the
finance offer and make them more
prominent.
Representative Example ‘hidden’
away in the small text.
- Not given enough prominence
Non Compliant
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21Guidance on Credit Advertising
201408-002
How to Market Finance on
eCommerce Stores
Examples of Credit Advertising
Example: Product Page
Advert does not include the
advertiser’s address, its statutory
status disclosure, a statement
about its independence or a
comment that credit is available
subject to status.
Non Compliant
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22Guidance on Credit Advertising
201408-002
How to Market Finance on
eCommerce Stores
Examples of Credit Advertising
Example: Product Category Page
Advert does not include the
advertisers address, its statutory
status disclosure, a statement
about its independence or a
comment that credit is available
subject to status.
You can’t ‘Cherry Pick’ parts of
the finance offer and make them
more prominent.
A ‘representative example’
showing the ‘standard
information’ should be shown.
Interest rate not shown in correct
format and cannot be given more
prominence than other parts of
the ‘standard information’.
Non Compliant
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23Guidance on Credit Advertising
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Common Practices on
eCommerce Stores
Examples of Credit Advertising
Some retailers are choosing to interpret the law in a way which may not be compliant. We have shown an example of a technique they are using, but please note, V12 Retail Finance does NOT condone this technique.
Non Compliant
Example: Category Page
On this Interest Free example, the monthly
payment is shown. User clicks the link to
reveal...
...the standard information
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24Guidance on Credit Advertising
201408-002
Common Practices on
eCommerce Stores
Some retailers are choosing to interpret the law in a way which may not be compliant. We have shown an example of a technique they are using, but please note, V12 Retail Finance does NOT condone this technique.
Non Compliant
Example: Product Info Page 1
Monthly payment shown with term. User clicks
the link to reveal...
...the standard information
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25Guidance on Credit Advertising
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Common Practices on
eCommerce Stores
Some retailers are choosing to interpret the law in a way which may not be compliant. We have shown an example of a technique they are using, but please note, V12 Retail Finance does NOT condone this technique.
Non Compliant
Example: Product Info Page 2
Enlarged section
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26Guidance on Credit Advertising
201408-002
Guidance on
Credit Advertising
How can I use Low Rate and Fixed Classic Credit to increase sales and reduce average subsidies?
Low Rate credit products (9.9% APR) are designed to bridge the gap between Interest Free and
Fixed Classic Credit.
We recommend that in addition to your lead finance offer (for example 0% Interest
Free) you also offer customers a mix of Low Rate Classic Credit options over longer terms.
Customers are attracted by the reduced monthly payments and your average retailer subsidy
reduces significantly.*
*Please remember your lead finance offer must be the one that over 51% of your customers will apply for.
Online Credit Marketing Checklist
Make your finance offer highly visible throughout your site (home page, landing and product
pages, shopping cart, checkout and so forth) so that consumers instantly know that you offer
credit before they start searching for the products they want. Introducing credit from the outset
changes consumer behaviour and is the key to attracting new customers, increasing sales, profit,
conversions and average order values. Here are the key points to remember:
Don’t wait until checkout - Promote finance from the moment the consumer arrives on your
site and all the way through the purchase process
Give the consumer all the facts - Provide the representative example in the correct manner.
Tell them who can apply, how to apply and provide an FAQ answering common questions
Sell the benefits of finance - Low monthly cost, deferred payments, increased spending
power, ability to spread the cost, convenience of an additional credit line. If such incentives
are used, ensure the advert includes the representative APR
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27Guidance on Credit Advertising
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Guidance on
Credit Advertising
Online Credit Marketing Checklist (continued)
Don’t forget the shopping cart! - When a consumer views their shopping cart, reinforce that
finance is available for the items they have chosen. As well as displaying the total price,
include the available finance options. If the value of the cart contents is less than the
minimum amount to qualify for credit (for example the consumers total spend is £270 and the
minimum spend you’ve set is £300) include a message such as: “Spend an extra £30 to
qualify for 12 months interest free credit”
Create a finance information page - Detail all the information your customers need to know
about your finance offers on a dedicated web page
Credit worthiness - Inform your customers that checks will be conducted in order to confirm
(i) the affordability (of the credit sought) to the customer; and (ii) the credit worthiness of the
customer
How can I maximise acceptance rates?
Carefully consider the credit offers you are promoting to your customers. For example, the type of
customer drawn to 12 month 0% interest free credit on a premium brand £1,500 bicycle is more
likely to be more credit worthy than the one drawn to a 36 month classic credit 15.9% APR offer
on a £400 value brand television.
Secondly, you should make clear the eligibility criteria at the same time as promoting the benefits.
For example, the line “Applications from students and unemployed will not be considered” will
go a long way to boosting acceptance rates. Acceptance rates are an important consideration
for retailers as they directly influence subsidy rates and impact customer satisfaction and loyalty.
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V12 Retail Finance is a trading name of Secure Trust Bank Plc. Secure Trust Bank Plc. Registered in England and Wales 541132.
Registered Office: One Arleston Way, Solihull, B90 4LH. Authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation Authority. Registration number: 204550.