New credit advertising regulations came into force on 1 February 2011, implementing the Consumer Credit Directive.
The 2010 regulations apply to unsecured credit including loans, hire-purchase and credit cards.
They apply to all forms of advertising, including in print (for example, newspapers, circular letters, flyers, catalogues or billboards), on television or radio, on the internet, on teletext or by way of telephone canvassing.
In particular, the regulations provide that - if an advertisement includes an interest rate or any amount relating to the cost of the credit - this triggers a 'representative example' including a 'representative APR'. This must be representative of agreements expected to be entered into as a result of the advertisement, and at least 51 per cent of borrowers must be expected to get the advertised APR or better. The representative APR is also triggered by a non-status or comparative indication or incentive.
The representative example must include - in addition to the representative APR - the annual rate of interest, any non-interest charges required to be paid for the credit, and the amount of credit. In addition, where applicable, it must include the duration of credit, the total amount payable, the periodic instalments, and the cash price of goods or services financed by the credit. All of this information must be shown together and of equal prominence, and must be more prominent than any other cost information and any trigger.
See the Consumer Credit (Advertisements) Regulations 2010 online.
See also chapter 6 of the BIS guidance on the regulations implementing the Consumer Credit Directive which summarises the new advertising regulations and the principal requirements.
The OFT will consider issuing supplementary guidance in the light of enforcement experience and queries on the new regulations.
The 2004 regulations continue to apply to secured credit, i.e. advertising for second charge mortgages (where this is not regulated by the Financial Services Authority under the Financial Services and Markets Act).
See the Consumer Credit (Advertisements) Regulations 2004 online.
The OFT has produced guidance and FAQs on the 2004 regulations, setting out our interpretation of key provisions. Some aspects will also be of relevance to aspects of the 2010 regulations, in particular in relation to issues of publication, prominence and APR triggers.
Download Consumer Credit (Advertisements) Regulations FAQs (OFT746) (pdf 376 kb).
Download Credit advertising guidance (OFT016) (pdf 450kb).
In addition, the FSA and OFT have jointly issued guidance to help firms identify where an advertisement for secured lending may be dually regulated and to address some common issues that firms may encounter when creating a fully compliant advertisement. The FSA and OFT have also produced joint guidance on online sponsored links.
Download the joint FAQs (pdf 200kb) or view them on the FSA website.
Download Online sponsored links - Joint FSA and OFT guide to advertisers of financial products and services (pdf 375kb)
Credit and hire advertisements are also subject to the Consumer Protection from Unfair Trading Regulations 2008 - see the CPRs webpage.
The CPRs prohibit unfair commercial practices, including misleading actions or omissions. For example, if an advertisement contains false information or is likely to deceive consumers in relation to specified matters, or if it omits or hides material information or provides such information in a manner which is unclear, unintelligible, ambiguous or untimely.
The OFT and BIS (formerly BERR) have jointly issued guidance on the CPRs. See Consumer Protection from Unfair Trading Regulations.
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