Changes to the rules on financial promotions
On 28th September, the FCA published Policy Statement PS15/23 following its consultation on consumer credit published in February 2015 (CP15/6), confirming its final rules and guidance on changes to the Consumer Credit Sourcebook (CONC); including the rules concerning financial promotions in CONC 3.
The FCA have proceeded with the majority of their proposals outlined in the consultation paper and have provided a summary of the feedback received and their responses. The changes to CONC 3 will come into force on 2 November 2015.
Importantly, the FCA have proceeded with their proposal to amend requirements for representative examples and APRs from being "more prominent" to "no less prominent" than the cost of credit and incentive / comparative triggers. This small but significant change from the current requirements is likely to enable firms to comply more easily with prominence requirements when designing credit related financial promotions. The FCA refer specifically to firms being able to comply more easily in relation to certain media such as radio. The FCA have also provided additional guidance as to the meaning of 'prominence'.
- "Interest Free Credit"
The FCA have not proceeded with their proposal to amend the guidance on the conditions requiring inclusion of a representative example to include the words "interest free credit". Some respondents argued that "interest free" is not a statement of interest and where credit is free of interest and charges, a representative example has no value to consumers and amounts to information overload. The FCA plan to consult further on this in December to consider a proposal to exclude promotions from the requirement to include a representative example or representative APR if the credit is free of all interest and other charges.
- The other main proposals for which the FCA are proceeding with changes relate to:
High-Cost Short-Term Credit: The FCA have removed the exemption from HCSTC risk warnings and assert that the circumstances where it might be impractical to include the warning are extremely limited.
Clear, fair and not misleading: The clear, fair and not misleading guidance has been elevated to a rule which the FCA state will give greater clarity and increase both regulatory certainty and protection for consumers. However the requirements have been moved into CONC 3.3.1R so that the defence of "reasonable steps" will be provided. The FCA have clarified that firms are expected to arrive at their own interpretation of 'clear, fair and not misleading' and be able to justify this if challenged.
Representative APR: In light of feedback received the FCA have amended the provisions concerning the triggers for a representative APR clarifying that a 'Comparison' would mean a comparison relating to the credit (rather than goods or services financed by the credit).
Other changes: Guidance on the representative example to clarify the basis for the calculation of a representative APR and guidance on "pre-approved" and "guaranteed" promotions to clarify that there must have been an assessment of affordability or creditworthiness in line with CONC 5. The FCA have not amended the requirement to state the lender's name in a credit broking promotion but in their response to feedback, have clarified that this only applies if the name of the lender is known at that point.