guidance on credit advertising - actsmart...guidance on credit advertising this guide is issued on...

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.

02Guidance on Credit Advertising

201408-002

Guidance on Credit Advertising

Contents


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 0

• Product Category Page 22

• Product Info Page 1 24

• Product Info Page 2 25


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


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


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.


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.”


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.


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.


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.


201408-002

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.


201408-002

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.


201408-002

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.


201408-002

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.


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.


201408-002

How to Market Finance in

Print 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.


201408-002


Print 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.


201408-002


Print 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


201408-002

How to Market Finance on

eCommerce Stores


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.


201408-002


eCommerce Stores


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’.


201408-002


eCommerce Stores


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!


201408-002


eCommerce Stores


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


201408-002


eCommerce Stores


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


201408-002


eCommerce Stores


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


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: Category Page

On this Interest Free example, the monthly

payment is shown. User clicks the link to

reveal...

...the standard information


201408-002

Common Practices on

eCommerce Stores


Non Compliant

Example: Product Info Page 1

Monthly payment shown with term. User clicks

the link to reveal...

...the standard information


201408-002

Common Practices on

eCommerce Stores


Non Compliant

Example: Product Info Page 2

Enlarged section


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


201408-002

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.

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.

guidance on credit advertising - actsmart...guidance on credit advertising this guide is issued on...

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