In the Wear Valley Advertiser the local Co-op store advertised a Panasonic TV at £599.90 with a bold type heading 12 months’ interest free credit.
When: May 2000
Where: Queen’s Bench Divisional Court, London
What happened:
In the Wear Valley Advertiser the local Co-op store advertised a Panasonic TV at £599.90 with a bold type heading "12 months’ interest free credit." Underneath this was a caption showing the Co-op dividend card and saying "5% dividend on all non-food with your Co-op dividend card." It was pointed out in small print underneath that there was no dividend on credit-assisted purchases.
Durham trading standards prosecuted. They said the Consumer Credit (Advertisements) Regulations 1989 had been breached. Regulation 7 states that no advertisement can use "interest free, 0% finance" or any similar expression unless the total amount paid by the credit buyer is no more than the cash price. ("Cash price" is defined elsewhere as the price at which products may be bought, account being taken of any discount generally available.) Here, Durham TSOs said, cash buyers were in fact paying a lower cash price than those buying on credit as they got a 5% dividend which was not available to credit buyers. The magistrates disagreed. They thought the divi, as it took six months to come back to the buyer and was only available anyway to those who joined the loyalty scheme, was too far removed from the ad to detract from the correctness of "interest free credit." Durham appealed and in the Appeal court won the day.
The reality of the situation, the Divisional Court judges said, was that however it was described, the dividend was a discount generally available, so had to be taken off the cash price before comparing the cash and credit deals. This meant that credit buyers were paying more, so the deal was not truly interest free and the ad was misleading and contrary to the Consumer Credit Act 1974 (which makes it a criminal offence to publish a misleading credit advertisement) and the 1989 Regulations.
Why this matters:
Combining cash-back or loyalty scheme benefits with credit deals needs to be treated with extreme care. No matter how non-misleading the offering may seem, the relevant rules are not easy to apply and this area is currently "flavour of the month" with trading standards enforcers.
