OFT launches joint review with trading standards service

99/04    18 June 2004

The OFT will launch a review of credit advertising at the Trading Standards Institute conference in Manchester on Tuesday 22 June. The review will monitor compliance by advertisers and publishers with the law. Enforcement action will follow where it is needed.

The OFT hopes to carry out the review in partnership with the trading standards service (TSS) who will review regional newspapers in their areas. Six regions have so far said they are ready to help.

In a short review of eight national tabloid and broadsheet newspapers carried out in November last year, the OFT found that 36 per cent of credit advertisers failed to comply with the Consumer Credit Act and the Consumer Credit (Advertisements) Regulations. A further review of six Scottish newspapers in January found that 48 per cent of credit advertisers did not comply. Those breaches included:

• omitting the APR (where it is required by law) or failing to give it due prominence
• advertising credit agreements as 'interest-free' where borrowers in fact are liable to interest charges should they fail to pay off the full sum by a specified date
• failing to give information on brokers' fees and other charges that have to be paid under the agreement advertised (when it is required by law)
• using very small print.

Following these reviews, the OFT has secured undertakings from advertisers using its powers under the Enterprise Act (see press releases 97/04 and 98/04). Advertisements have been changed or withdrawn as a consequence.

The OFT and trading standards services will work with publishers to help ensure that advertisements that do not comply with the regulations are not accepted. The OFT will provide training for the trading standards service in the autumn, and will publish guidance on compliance with revised legislation due to come into force in October 2004 (see note 1). The OFT is also discussing enforcement co-operation and co-ordination with the FSA in this area. The OFT plans further reviews of other advertising media including print and direct mail.

Christine Wade, OFT Director of Consumer Regulation and Enforcement said:

'With changes to the law due later in the year, it is the right time to take further steps to ensure that credit advertising is clear, fair and not misleading. We will explain the law to business through guidance. Where necessary, we will take enforcement action against advertisers who fail to comply with the regulations and also the publishers where appropriate. We welcome the support of our trading standards partners in this work.'

NOTES

1. Consumer credit or hire advertisements must comply with section 46 of the Consumer Credit Act 1974 and the Consumer Credit (Advertisements) Regulations 1989. The Regulations apply to advertising in all its forms whether on television, radio, video, electronically or in print, and cover the amount and type of information and the way it is presented. OFCOM is the regulator for television and radio advertising. Following the Government’s review of the 1974 Act, revised credit advertising regulations will come into effect in October 2004. See DTI press notice P/2004/210 for further details.

2. The OFT has published guidance to help business comply with the regulations. These are 'Credit Advertising' (October 2003); 'Credit Advertising: From APRs’ (February 2000); 'Discounted APRs and PPI' (February 2000).

3. The draft Consumer Credit (Advertising) Regulations 2004 were laid before Parliament on the 8 June 2004 and may be accessed at DTI website.

4. The following trading standards regional groups have given their initial agreement to participate in the credit advertising review:

• North West region
• Northern region
• Scotland
• South East region
• Crossing the Boundaries
• London.