ASA Adjudication on Buckley Stephens & Co. Ltd

Ad

Complaints from HSBC and a member of the public, about ads in the national press and on radio, for Individual Voluntary Arrangements (IVAs).

a. The national press ad was headlined "Debt Help! We can help you ..." Text in the ad stated "Write off up to 90% of your debts and repay the balance over 5 years without a loan or interest. In the past 5 years Spectrum have helped tens of thousands of people break free from debt ... Call now for FREE no obligation advice".

b. The radio ad claimed "It doesn't matter how you got into debt. It doesn't matter why you got into debt. What does matter is how you get out of debt. If you're like thousands of other people who dread the sound of the letterbox, maybe you should call Spectrum. Government legislation means that Spectrum could write off up to 90% of your debts, leaving you debt free with no interest and no more loans in just five years. Thousands of people are already on their way to being debt free - you could be too. Just call Spectrum free ... subject to acceptance".

Issue

HSBC challenged whether:

1. the claim "Write off up to 90% of your debts" in ad (a) was misleading and could be substantiated, because they believed the claim exaggerated the amount that most consumers were likely to be able to write off;

2. ad (a) was misleading, because it did not state the fees payable under the terms of the IVA and

3. ad (a) was misleading, because it did not make clear that entering an IVA had a significant impact on a debtor's credit history.

A member of the public challenged:

4. whether the claim "Spectrum could write off up to 90% of your debts" in ad (b) was misleading and could be substantiated and

5. whether ad (b) was misleading, because it did not state the fees payable under the terms of the IVA.

CAP Code (Edition 11)

BCAP Radio Code

Response

1. & 4. Spectrum Financial Protection (Spectrum) explained that the claim referred to the amount of debt a consumer could expect to write off under the terms of an IVA or a Protected Trust Deed. They said they had negotiated many IVAs where creditors agreed to accept a dividend of 25p in the pound, meaning that the debtor had written off the remaining 75p in the pound, or 75% of their debt. They said they had negotiated many Protected Trust Deeds where creditors agreed a dividend of 10p in the pound, meaning that the debtor had written off 90% of their debt. They argued that claims to write off "up to" a particular amount were based on accepted industry practice and were based on actual achievements. They sent documentation from a Scottish Insolvency Practice that confirmed a selection of clients referred to the Practice by Spectrum had arranged to pay a dividend of between 9.8p and 21.7p in the pound to their creditors under the terms of a Protected Trust Deed. They sent documentation from an English Insolvency Practice that confirmed a selection of clients referred to the Practice by Spectrum had arranged to pay a dividend of 25p in the pound to their creditors under the terms of an IVA.

They said ad (a) was produced by an agency that was no longer used by Spectrum and that they now produced their own ads, which they had sent to a Trading Standards Officer to ensure compliance.

The Radio Advertising Clearance Centre (RACC) sent correspondence from Spectrum that included a letter from one insolvency practitioner giving details of cases where clients had obtained a dividend of 25p in the pound. Spectrum had also given a written assurance that in the last quarter for which there was available data, 60% of their clients had obtained dividends of 10p in the pound. The RACC said that, while they understood 90% was a very strong claim, they thought significant amounts of debt could be written off in an IVA. They said they required advertisers to claim "up to" 90% or 75% to make clear that not everyone could expect to write off that amount and "subject to acceptance" to make clear that the arrangement was subject to acceptance by creditors.

2. & 5. Spectrum explained that they offered potential clients three different services. One was the IVA or Protected Trust Deed, the second was an informal debt solution and the third was debt advice. They said there was no charge for the initial telephone consultation or the subsequent meeting between a potential client and an advisor that determined which service was suitable. They admitted that fees were payable on IVAs, but pointed out that they were made clear to clients before the IVA was negotiated. They argued that, because the fixed amount repaid by the debtor in an IVA was based on what they could afford and the fees were built into the monthly repayments made as part of the arrangement, those fees made no difference to the resolution of the IVA and there was no need to refer to them in the ad.

The RACC said they believed consumers understood that costs were associated with the products and services promoted in radio ads.

3. Spectrum said a proportion of their clients already had a bad credit history and that was one of the reasons they chose to enter an IVA. They said they had amended their ads to state that a client's credit record might be affected.

Assessment

1., 2., 4. & 5. Upheld

The ASA noted that IVAs were available in England, Wales and Northern Ireland, while Protected Trust Deeds were available in Scotland only. Although we noted that no minimum dividend was enforced in law on either a Protected Trust Deed or an IVA, we considered that Spectrum's own evidence showed that it was possible to obtain a dividend of 10p in the pound in a Protected Trust Deed only, not in an IVA. Furthermore, we noted that Spectrum's evidence did not demonstrate the proportion of their clients that had obtained a minimum dividend of 10p in the pound. We did not consider Spectrum's written assurance was adequate to demonstrate that 60% of their clients had obtained a dividend of 10p in the pound and noted it did not make clear how many of those clients entered a Protected Trust Deed and how many entered an IVA.

We noted that Spectrum also offered informal debt solutions, but that they had not provided evidence that demonstrated how much of their debt consumers could expect to write off if they used that service. We noted that ad (a) contained footnote text that stated "IF YOU HAVE DEBTS OVER £5,000 AND A REGULAR HOUSEHOLD INCOME YOU MAY QUALIFY TO TAKE ADVANTAGE OF THIS GENUINE GOVERNMENT LEGISLATION TO CLEAR YOUR DEBTS". However, we considered that, particularly in the context of a national press ad, the overall impression created by the headline claim "Debt Help! We can help you ..." and the subheading "Write off up to 90% of your debts" was that a significant proportion of customers throughout the UK could expect to write off 90% of their debt. We noted that ad (b) had been broadcast across major cities in England only. We considered that the claim "Government legislation means that Spectrum could write off up to 90% of your debts" in ad (b) implied that a significant proportion of customers in England could expect to write off 90% of their debt.

We understood that, in an IVA or a Protected Trust Deed, fees were typically taken into account when calculating what the debtor could afford to repay and were then incorporated into their monthly repayments. We noted that, while debtors might not pay upfront fees in an IVA or Protected Trust Deed, the incorporated fees were added to the dividend paid to creditors and would therefore have a significant impact on the amount consumers would pay in an IVA or a Protected Trust Deed. We noted that Spectrum had based the claims "Write off up to 90% of your debts" in ad (a) and "Spectrum could write off up to 90% of your debts" in ad (b) on a dividend of 10p in the pound and had not taken into account that, when fees were added, debtors would pay a larger amount than the 10% payable to creditors.

We concluded that ads (a) and (b) were misleading and exaggerated the amount of debt consumers would be able to write off.

3. Upheld

We welcomed Spectrum's decision to amend future ads to state that a client's credit record might be affected. We understood that IVAs could have a significant impact on a consumer's credit history and might affect their applications for credit in future. We considered that was a significant condition of the IVA that was likely to affect consumer interest in the arrangement and should be made clear. We concluded the ad was misleading.

On points 1, 2 and 3, ad (a) breached CAP Code clauses 3.1 (Substantiation) and 7.1 (Truthfulness).

On points 4 and 5, ad (b) breached CAP (Broadcast) Radio Advertising Standards Code section 2, rule 3 (Misleadingness).

Action

The ads should not appear again in the same form.

We told Spectrum to ensure they held suitable evidence to demonstrate that a significant proportion of consumers could benefit from any savings quoted in future similar ads and to take account of the impact of fees when calculating what proportion of their debt consumers could expect to write off. We advised them to seek guidance from the CAP Copy Advice team when preparing non-broadcast ads in future.

Adjudication of the ASA Council (Broadcast)

Adjudication of the ASA Council (Non-broadcast)