Background
Radiocentre is the industry body for commercial radio. It has produced some industry guidance (“Guidance”) on the use of financial promotions involving consumer credit or hire.
The Guidance is aimed at ensuring that financial promotions on this topic which are communicated over the radio comply with the provisions of the Financial Conduct Authority’s (“FCA’s”) Handbook, including the provisions of the Consumer Credit Sourcebook (“CONC”).
On 14 January 2020, the FCA confirmed by way of a written letter to Radiocentre that its Guidance had been approved by the FCA. As such the industry can rely on the Guidance as the best practice for ensuring compliance with some of the FCA requirements in this area.
What does the Guidance say?
The Guidance says that firms authorised and regulated by the FCA (“Firms”) must provide balanced and accurate information in financial promotions to ensure that any product benefits are not misrepresented.
The Guidance also states that Firms must provide this information over the radio in such a way that it can be easily understood and recalled by the consumer. This means, for example, that where the legal information required by the FCA rules is given, usually at the end of the promotion and with reference to terms and conditions applying, this information should be given clearly and be easily memorable for consumers. This means that such information should not go on for so long or involve so much content that it dilutes the legally significant information that is required to be communicated to and remembered by the consumer.
The Guidance does however recognise that the content of each promotion should be assessed on a case by case basis.
Frequently asked questions (“FAQs”)
The Guidance contains some FAQs, many of which are very relevant to those who operate within the industry using radio promotions, which provide further specific guidance.
The FAQs include the following:
In most cases it is unlikely to be necessary to include wording such as or equivalent to “subject to status”. This wording is quite often used in the promotion as an attempt by Firms to comply with CONC 3.3.3. This provision is the FCA’s requirement that firms make it clear to consumers that the credit they are offering within the promotion is not just available generally regardless of the consumer’s financial circumstances or status. The Guidance states that consumers should generally understand that acceptance for such credit is not guaranteed and is subject to individual assessment. However the Guidance does qualify this statement in that where promotions speak about credit being available for certain classes, for example those with CCJs, further information would be required within the promotion to clarify the terms of this. It would seem to us therefore better that no such class references are given though commercially this may not be sensible.
It is also not necessary to state that credit is available only to those who are over 18 as again this should be generally understood. Again the Guidance does qualify this statement however so that if the promotion does appear to target or include an audience who is likely to be under 18, clarification is given. For example, if the promotion addresses new drivers.
Where the promotion relates to hire or leasing it is not necessary to confirm that the customer will not own the vehicle unless by not doing so the consumer is likely to be misled or confused. The wording of the promotion should therefore be carefully considered and if it is likely that a consumer could draw an inference that they will own the vehicle then it will be necessary to clarify otherwise to them within the promotion.
Depending on the wording of the promotion itself, it may also not be necessary to state the nature of the offer, i.e. that the credit will be provided by way of a hire purchase agreement or otherwise. However it will very much depend on whether or not the promotion has already made this clear. If it has not then it may be necessary to do so in order to comply with CONC 3.3.1, which is the provision which states that firms must ensure all promotions are clear, fair and not misleading.
In a similar way it may not be necessary to include the fact that mileage restrictions apply to hire agreements as this is generally accepted as the usual in such circumstances. However again the Guidance qualifies this statement by reference to CONC 3.3.1 and in particular the requirement that firms present the promotion in a balanced way giving warnings as to the risks of such products as well as the benefits. For example if the price quoted within the ad is likely to increase due to the nature of the mileage restrictions then it should be stated that mileage restrictions apply.
The representative APR need only be provided in such a way that it is given no less prominence than the information which has triggered its requirement as per CONC 3.5.7. This means that it does not necessarily have to be re-stated at the end of the promotion if it has already been referred to prominently enough within the main content of the promotion.
It is not necessary to state that the Firm is regulated by the FCA within the promotion.
Our view
We applaud the efforts of Radiocentre in attempting to obtain clarification as to the FCA’s views on the correct approach to financial promotions on the radio. It is our view however that the qualifications they have given in their Guidance as to when it is okay to omit certain information and when it is not remains unclear for those within the industry. It is more likely that those within the industry will continue to ensure that they include information such as, for example mileage restrictions or the nature of the offer, to avoid potential exposure to criticism and even penal action from the FCA for their decision not to include such information. This is because it is clear, even in the Guidance, that not to do so requires some judgment on their part which they may later then have to justify and should they not be able to do so to the FCA’s satisfaction they may then suffer a penalty as a result.
Timescales
The FCA’s approval of the Guidance will be valid for three years (to 13 January 2023) providing there is no change in content to the Guidance or the underlying FCA requirements during this period. Radiocentre can then apply back to the FCA for renewal of its approval of the Guidance. It will be interesting to see whether the industry do look to rely on the Guidance during this period and the outcomes for them of doing so.
