B&Q hauled competitor Homebase in front of the Advertising Standards Authority for alleged breach of consumer credit ad regulations. These state that including an ‘incentive’ in your ads to take out credit triggers a raft of content requirements. But surely all credit ads went to incentivise punters to borrow?
Topic: Financial services
Who: Homebase Limited
When: June 2005
The Advertising Standards Authority received a complaint from B&Q Plc that a TV ad for a Homebase kitchen sale breached the Consumer Credit (Advertisements) Regulations 2004 ('Regulations').
The voiceover included the statement "All kitchen units are half-price and some have an extra 25% off. You can even buy this now and pay nothing for 12 months with your Homebase card."
B&Q complained that the advertisement included an incentive to enter into a credit agreement which triggered a requirement under the Regulations to specify the typical annual percentage rate ('APR') and the name of the credit provider. Neither was mentioned.
Homebase argued that the voiceover words were not an incentive at all, but simply an indication of the normal way in which the credit card in question operated.
The ASA sought advice from the Office of Fair Trading, who confirmed that the statement "buy now and pay nothing for 12 months with your Homebase card" appeared to be an "incentive" under the Regulations and would trigger the requirement for the typical APR to be quoted.
The ASA therefore concluded that because consumers were invited to pay nothing for 12 months, but only if they bought the goods using a Homebase (store) credit card, this was an "incentive" and the advertisement therefore broke the code by failing to include the typical APR.
Why this matters:
It is quite true that any "advertisement must specify the typical APR if it includes any incentive to apply for credit or to enter into an agreement under which credit is provided".
Having said this, it might be said that any advertising that invites the consumer to take up credit is likely to contain some sort of incentive or other, otherwise it would not be an advertisement worthy of the name. Does advertising of a normal feature of a consumer credit card deal amount to an "incentive" or does it simply amount to a feature and therefore not trigger the requirement to quote "typical APR"? We think we should be told.
There are also other requirements that come into play if the typical APR must be quoted. For instance, the APR must be more prominent than the reference to the incentive.
We do not think that this will be the first case in which this issue is aired and advertisers come to grief. Unless and until we have greater clarity from the Office of Fair Trading on the situation here, and they might do well to issue guidance on the point, the only safe course may be to quote typical APR and follow the other attendant rules in all advertising mentioning that the purchase can be effected by a credit card.