The OFT recently published the results of a trading standards ‘advertising sweep’ monitoring compliance with the Consumer Credit (Advertisements) Regulations 2004.
Topic: The Consumer Credit Act (Advertisements) Regulations 2004
Who: The Office of Fair Trading and Trading Standards
When: Autumn 2005
The Consumer Credit (Advertisements) Regulations 2004 (the "Regulations"), when introduced, heralded major change for the consumer credit advertising regime and have now been in force for fourteen months. Last Autumn, the Office of Fair Trading ("OFT") published the results of one of its regular "advertising sweeps" carried out by Trading Standards officers to assess compliance with the new regime. The results make interesting reading, as it is clear that certain problem areas and issues recurr to bamboozle advertisers.
The OFT found that over sixty per cent of advertisements in regional newspapers and sixty eight per cent in popular car magazines, failed fully to comply with the Regulations. The most common problem related to the way in which typical APRs were depicted in advertisements. Examples of non-compliance included:
· no typical APR being shown, where required to be shown by the Regulations;
· displaying more than one typical APR in an advertisement; and
· the typical APR not being given the required prominence (the Regulations require a certain font size for citation of the APR).
Other problematic issues concerned information not being shown together as a whole and interpretation of the Regulations relating to "trigger" information such as comparative indications, non status indications and incentives. A contentious area of misunderstanding included the distinction between what constitutes a statement of fact and what constitutes a comparative indication. In the OFT's view, seemingly factual statements such as "no annual fee" or "low redemption charges" are capable of containing an implied comparison which would trigger the obligation to display the typical APR in the advertisement.
The OFT commented that:
'The findings of our sweep are most unsatisfactory for consumers, who must have clear information on the costs of loans. The OFT and trading standards services are working with business to drive up compliance, and will take enforcement action where necessary'.
Why this matters:
The next advertising sweep promises to be even more interesting as it will be the first sweep undertaken since publication (at the end of September 2005) of the updated booklet "Credit Advertising" and the updated answers to "Frequently Asked Questions", both of which aim to provide detailed advice on compliance with the Regulations. The sweep will be a litmus test of the efficacy of the OFT's guidance.
The sweeps demonstrate that the OFT monitors compliance carefully and regularly. Advertisers should note that the Regulations are complex and ostensibly straightforward issues such as the inclusion of statements such as "no annual fee" can cause problems. The recommendation is to read the guidance carefully and take advice where appropriate.