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On May 6, 2022, the Financial Conduct Authority (FCA) sent a letter to almost 28,000 companies providing credit brokerage services or high cost lending products. Noting that millions of people are facing the biggest cost of living crisis in more than a decade, the FCA has reminded consumer finance companies in no uncertain terms of their responsibility not to exploit these circumstances. .
The FCA has underlined the fact that it expects to see greater demand for credit while warning that it will closely monitor the sector to avoid unsustainable and unaffordable lending.
It clearly expects approved companies to ensure that financial promotions are clear, fair and not misleading – as well as compliant with the rules set out in its compendium of consumer credit sources (CONC 3). Drawing attention to unacceptable practices, the FCA noted that it has identified promotions:
- use terms such as “loans without credit check”, “secured loan”, “pre-approved” or “no credit check“, which may be true for credit brokers, but could falsely lead consumers to believe that the lender will not check the credit status at all;
- offering brokerage or direct lending services for high cost short term credit without the required risk warning (“Warning: late repayment can cause you serious financial problems. For help, go to moneyhelper.org.uk”);
- do not include the APR representative; and
- by credit brokers, failing to declare that they are brokers rather than lenders,
all of which can break the rules of CONC 3.
Although the FCA acknowledged that some advertising mediums may appear to create difficulties in meeting FCA requirements, the FCA found that their rules were generally media neutral and amenable to compliance. comply regardless of character limitations.
In addition, the FCA has reminded companies that they must also comply with the CAP code administered by the Advertising Standards Authority (ASA). In addition, the FCA cited the ASA’s guidance on short-term and payday loans, which clearly articulates the need for marketing to be socially responsible. The ASA advisory also clarifies that the ASA’s ratings of advertisements are likely to place undue emphasis on speed, ease of access, targeting of vulnerable groups and whether an advertisement may trivialize subscription. ‘a loan. Each assessment may be based on its facts, but these tips provide clear guidance that companies should consider to avoid falling under the CAP Code.
Despite the list of issues it had identified, CAF was clear, this list should not be considered exhaustive. The FCA has suggested that companies review their financial promotions to ensure they comply with CONC 3, review financial promotions systems, processes and controls to ensure they are sufficient to comply with CONC 3 CONC 3, and draw the attention of their Board of Directors to the letter.
The FCA will proactively monitor the market to assess compliance and expects companies to put the interests of their customers at the heart of their business, including when drafting their financial promotions.
Companies should view this letter both as illustrative guidance on certain key areas on the FCA’s radar and as an unequivocal warning that, given the current economic circumstances, action will be taken against companies that fail to comply. to their rules.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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