The Financial Services and Markets Act continues to make waves for financial service marketing. Another key change on the horizon is to the regulatory regime for mortgage ads.
New law: New rules under the Financial Servs under the Financial Services and Markets Act 2000
Background:
The Consumer Credit Advertisements Regulations 1989 have long been regarded as overly prescriptive, complex and leading to greater rather then less consumer confusion about advertised credit deals. There have been reviews which have recommended changes, but apart from a recent relaxation of the “wealth warning” requirement for transient advertising such as that on the radio, little has changed since the rules came into force. This picture was always likely to change with the advent of the Financial Services and Markets Act 2000 and its wholesale restructuring of the financial services regulatory machine. But the changes to the regulation of mortgage advertising in the FSA’s “Draft Mortgage Sourcebook” may for many be threatening to replace one regulatory straitjacket with another.
What will change:
The net effect of the new draft rules will be to remove the “simple,” “intermediate” and “full” categories of advertisements for mortgage advertising, remove the need for small print examples of advertised deals, require the use of plain language, introduce a new concept of “balance” in the presentation of product features (more on this below), simplify the requirements as to what categories of information (e.g. APR and other interest rates) are provided, aid the use of comparisons (it says here) and require any tied purchase to be clearly stated.
The ditching of the three ad categories has to be good news, but the “balance” concept bears more examination. The proposal is that where a mortgage product has benefits and drawbacks, these should be set out with equal clarity, thus avoiding the confusion of consumers by biased presentation of information. Presumably this will be the case also with comparative claims, where the Comparative Advertising Directive’s requirements will continue to apply. But just how far will advertisers have to go in identifying and stating “drawbacks.”? There has to be potential here for regulatory fun and games unless the FSA gives more clarification. Hopefully this will be available in the final “Mortgage Sourcebook” as and when it is published.
Timetable:
The intention is to have the new rules in place by “N3” which is FSA speak for 1 August 2002.
Next steps:
Publication of the final version of the FSA’s Mortgage Sourcebook, which should be within the next few months.
