The OFT took action against retailers offering interest free credit with too many strings attached. The case underlines the new “Stop Now” order threat and obscure rules on marketing credit deals.
Who: Office of Fair Trading (“OFT”), Allied Carpets of Orpington, Furnitureland of Penge, Fairway Furniture of Plymouth and Gregory and Porritts of Bolton.
When: November 2001
The OFT recently used its new powers to threaten applications to the court for immediate “Stop Now” orders banning conduct contrary to consumer protection legislation. The retailers involved were all allegedly publishing misleading advertising by promoting supposedly illusory interest free credit or 0% finance deals. The illusion arose because interest was in fact charged on the whole of the loan if a lump sum was not paid off in full at the end of the one year interest free period. All four retailers backed down before court action was taken and said they would stop this form of advertising.
Why this matters:
The four retailers involved here were not alone. The OFT has promised to take a tough line on other retailers following the same practice and have written to at least 40 others. Some may not agree that there is anything misleading in advertising a deal as interest free where interest will not be charged if the borrower toes the line and makes all payments when required. However, para 7 c of the 1989 Consumer Credit (Advertisements) Regulations bans the description of any deal as interest free or involving 0% interest if the borrower is "liable to pay [a] greater amount in respect of a transaction financed by credit than he would be liable to pay as a cash purchaser in relation to the like transaction". But hang on, does "liable to pay" mean any possible liability, including liability if the deal terms are breached? Surely there is an argument that it does not. Perhaps, at least one retailer will fight the OFT and establish whether they are right on the point.