Credit firms such as payday lenders must stop misleading the public with their advertising, the Financial Conduct Authority has said.
One in five adverts from consumer credit firms have fallen short of the FCA’s expectations and subsequently had to be changed.
The rules state that adverts must be clear and not misleading.
Yet with payday loans the importance of APR is often played down or it lacks prominence, while there is commonly no mention of the risks of non-repayment.
A number of payday lenders are also not prominently displaying the risk warning that ‘late repayment can cause you serious money problems. For help, go to: moneyadviceservice.org.uk’.
Clive Adamson, director of supervision at the FCA, said: “It is particularly important in this sector that advertisements for financial products enable customers to make informed decisions. We think that more can be done to ensure that advertisements are fair, clear and not misleading.
“Firms have responded well when challenged about ads which have not met the standards. We will continue to work with firms and monitor their performance in this area to ensure the high standards we are looking for are met.”
In total, 108 consumer credit promotions, 38 of which were for payday lending, were identified as not meeting advertising standards in print, online, in-store or direct mail.
Of these cases 75 firms responded to amend or withdrawn promotions.
The FCA has found examples of consumers being encouraged to hit ‘apply’ for a product before having a chance to access important information, a tactic which is against its rules.
Other misdemeanours included targeting young audiences with promotions or claiming products help repair credit ratings or clear a customer’s debt, rather than simply replacing it with a new debt.
The FCA assumed responsibility of the sector on 1 April 2014, while it acts on complaints received from the public and the Advertising Standards Authority.