OFT helps businesses understand new credit advertising rules

173/04 15 October 2004

The OFT is helping businesses to understand new credit advertising rules by publishing answers to frequently asked questions.

New Consumer Credit Advertisements Regulations come into force on 31 October 2004 and all businesses who advertise credit services must comply. The changes are part of the Department of Trade and Industry's reforms of the Consumer Credit Act.

Download the frequently asked questions (449 kb pdf).

The regulations clarify what information should be included in different types of advertisement to enable consumers to compare products more effectively. For example, if an advert is aimed at non-status consumers – those consumers who would have difficulty in obtaining credit – it must show a typical APR. Similarly adverts that claim more favourable terms – e.g. 'cheaper loans' or 'lowest rates ever' – must include a typical APR. The new rules also require the typical APR shown to be of greater prominence than any other financial information in the advert. At least 66 per cent of the credit agreements granted must be at or below the typical APR.

In order to help businesses understand the new regulations, the OFT has published a document which answers frequently asked questions. It covers issues such as when the regulations apply, how APRs should be displayed, how the regulations apply to credit cards, how introductory rates should be treated and what is required for internet advertising.

Penny Boys, OFT Executive Director, said:

'The new regulations will help consumers understand the credit deals offered and enable them to compare them more effectively. Advertisers need to be aware of the changes and how to comply.'

NOTES

1. The Consumer Credit (Advertisements) Regulations 2004 were laid before Parliament on 9 June 2004 and come into force on 31 October 2004. They replace the Consumer Credit (Advertisements) Regulations 1989. The regulations are made under sections 44 and 151 of the Consumer Credit Act 1974 and cover the form and content of advertisements relating to credit or hire provision. Breach of the regulations is a criminal offence.

2. DTI published guidance on the new regulations on 5 August 2004 which is available on the DTI website

3. The OFT has a duty under section 4 of the Consumer Credit Act 1974 to disseminate information and advice relating to the Act. The OFT intends to publish full guidance on the new regulations in January 2005.

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