The Consumer Credit Act 1974 regulates consumer credit agreements and ads for loans up to £25,000. New CCA credit ad rules come into force on 31 October 2004 and the DTI has just published guidance on how to observe them.
Topic: Consumer credit
Who: The DTI, Consumer & Competition Policy Directorate
When: July 2004
The DTI published guidance notes on the up and coming Consumer Credit (Advertisements) Regulations 2004.
As already reported on marketinglaw.co.uk, these introduce a new regime for the advertising of consumer loans under £25,000 in the UK, scrapping the old "simple", "intermediate" and "full" ad categories.
The notes are a helpful adjunct to the new Regulations, due to come into force 31 October 2004 and for all those concerned in this area an early read is recommended. They may be found through www.dti.gov.uk/ccp/topics1/consumer_finance.htm
What follows are a few Guidance highlights and particular points to bear in mind.
The APR quoted must be representative of the business that the ad is expected to generate. To that end, the typical APR quoted must represent the rate at or below which the advertiser reasonably expects to apply to at least 66% of agreements entered into after and as a result of the advertisement. This is consistent with the approach that the FSA has adopted on mortgage regulations.
Also, the typical APR quoted must apply to the full range of the agreements made as a result of the advertisement and not merely to agreements with limits under the current £25,000 limit in the Consumer Credit Act.
No financial information?
Only the general requirement as to intelligibility and legibility, and not the detailed disclosure requirements, will apply to credit ads that include no financial information. This means that if the ad mentions only a name, contact details and general information about the products on offer including general statements as to the type of loans available, then there will be no need to give other fields of information, although ads for secured lending will have to include the appropriate wording as set out in regulation 7 such as "Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it".
This saving from the full rigours of the new Regulations will also not always apply. For instance, if a company or website name or address may of itself include a statement which includes financial information, it will trigger all the relevant disclosure requirements. An example cited by the guidance notes is www.cheapest-loan.com. (as it happens a real US website!).
This reflects Regulation 8 of the new Regulations whose effect is that where any favourable reference is made about the credit or nature of repayments or interest e.g. "no interest" or "cheap loans", the typical APR must be quoted and with the correct size and prominence.
"From X% APR"
"From X% APR" rates can be quoted, but the figure has to be the lowest APR that the advertiser reasonably expects at least 10% of those being given credit on or after the date of the advertisement to receive. It will also have to be accompanied in the ad by corresponding "to Y% APR" representing the actual, highest APR on offer. Both rates must have equal prominence.
Under Regulation 10 none of the requirements of the Regulations apply to an advertisement which is solely for business credit or business hire services. They also do not apply to advertisements or elements of advertisements for products and services regulated by the Financial Services Authority under the aegis of the Financial Services and Markets Act 2000.
Under the 1989 Regulations, if any comparative claim is made suggesting that the terms on offer are better than those of any competitor, full disclosure has to be given as to the competitor's offering. The new Regulations on the other hand include no specific terms governing comparative claims. This is because the Government has decided that the rules for comparative advertising contained in the Control of Misleading Advertisements Regulations 1988 as amended by the Control of Misleading Advertisements (Amendment) Regulations 2000 impose a sufficiently rigorous regime for comparative claims without the need for even more rules in the new Regulations.
The Regulations apply to all advertisements, except for those contained in a catalogue or directory of at least 50 pages, that are published on or after 31st October 2004. As for those catalogues and directories, those printed on or after 31 May 2005 will also have to comply with the new laws.
Why this matters:
The DTI guidance on the new Regulations is clear, concise and helpful, and although they do nothing to detract from the continuing complexity of the rules in this area as previously commented upon by marketinglaw.co.uk, early reading is recommended.