Background
On 1 April 2014, responsibility for regulating consumer credit passed from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA). As of that date, the Consumer Credit (Advertisements) Regulations 2010 are repealed and replaced by the FCA's Consumer Credit Sourcebook (CONC). The following adjudication relates to complaints received before 1 April 2014.
Summary of Council decision:
Two issues were investigated, both of which were Upheld.
Ad description
Two TV ads promoting loans from Sunny:
a. The first ad showed a female puppet character behind a desk, stirring a cup of tea which was branded "PAYDAY LOANS" and speaking on the phone. She said, "I'm sorry, I'm not sure what 'Sunny rates' are" and a male voice responded, "They're rates that can drop the next time you borrow, just by making four on-time payments. Do you have that?" The puppet looked startled and put the call on hold. A sign stating "Who'll Tell'em NO?" appeared from the ceiling of the office and lights flashed around six different puppets whilst music played. The puppet "Martin" was selected to continue the call and said "Uh, no, we don't have Sunny rates." The scene cut to show the man who had been on the other end of the phone hanging up and looking at the Sunny website on his laptop. Voice-over stated, "Introducing Sunny, a new way to borrow up to a thousand pounds when you need it. Learn more about Sunny rates at sunny.co.uk. Good today. Better tomorrow."
On-screen text shown whilst the man hung up the phone and browsed online stated "Subject to status and a credit assessment. T&Cs apply. 18+". At the end of the ad, large on-screen text stated "sunny", "Borrow up to £1000 today" and, appearing later, "visit sunny.co.uk" and "Good today. Better tomorrow".
b. The second ad featured a telephone conversation between a male puppet character sitting at a desk bearing the sign "PAYDAY LOANS" and a woman walking along a street. The puppet asked, "Any other questions, madam?", to which the woman responded "Do you have Sunny flexi-pay? That thing where you pick your repayment schedule?" The puppet said "Er, no ... but we can dance!", and other puppet characters in the background started dancing to music. The scene cut to show the woman hanging up the phone as she walked along the street. In the next shot, she smiled as the screen of her phone displayed the logo for Sunny, and a voice-over stated, "Introducing Sunny, a new way to borrow up to a thousand pounds when you need it. Find out about flexi-pay at sunny.co.uk. Good today. Better tomorrow."
White on-screen text shown whilst the woman walked along the street stated "Representative 1971% APR. Subject to status and credit assessment. T&Cs apply. 18+". At the end of the ad, large on-screen text stated "sunny", "Borrow up to £1000 today" and, appearing later, "visit sunny.co.uk" and "Good today. Better tomorrow".
Issue
The ASA received five complaints.
1. Two complainants challenged whether ad (a) breached the Code, because it did not include a representative APR (RAPR); and
2. Three complainants, one of whom was a money advice worker, challenged whether the RAPR in ad (b) was sufficiently prominent.
Response
1. Think Finance (UK) Ltd, t/a Sunny noted that the Consumer Credit (Advertisements) Regulations 2010 ("the Regulations") required the inclusion of the RAPR in ads which indicated, in any way, that any of the terms on which credit was available was more favourable than corresponding terms applied in any other case or by any other creditors (a "comparative indication"), or that included any incentive to apply for credit or to enter into an agreement under which credit was provided. They said there was no definition of an "incentive" or of "more favourable terms" in the Regulations or any accompanying legislation, but noted the existence of guidance produced by the Office of Fair Trading (OFT) on predecessor legislation. They considered that the guidance, as well as existing case law (the First-Tier Tribunal (Consumer Credit) decision in Log Book Loans v OFT) on the subject of incentives, suggested that neither ad (a) nor ad (b) contained a comparative indication or an incentive to apply for credit.
Sunny stated that Sunny rates, whereby interest rates might drop when repayments were made on time, were an inherent feature of the credit on offer and were neither a more favourable term nor an incentive. They said ad (a) did no more than inform viewers of one of the unique selling points of the product offered; it did not offer an additional benefit over and above the product itself, and nor did it state or imply that that product's features were the best or the cheapest. They also commented that the ad promoted responsible lending by rewarding those who borrowed responsibly.
After further consideration of the ad, Sunny said they accepted that the use in the ad of the generic payday loans business, not offering Sunny rates, created scope to argue an implied comparison with terms applied by other creditors. They said they were therefore prepared to include the RAPR in the ad in future.
Clearcast stated that in clearing the ad they had been satisfied by Sunny's argument that ad (a) contained no triggers requiring the inclusion of the RAPR.
2. Sunny noted that the RAPR was included in ad (b) in text 16 lines high and held for 6 seconds, whereas the hold duration recommended in industry guidance was only 5.8 seconds. They said the RAPR had been included in ad (b) voluntarily, rather than because they had considered the ad to contain any trigger requiring its inclusion. After reviewing the complaints, however, they said they accepted that the depiction of the generic payday loans business, not offering Sunny flexi-pay, created scope to argue an implied comparison with terms applied by other creditors. On that basis, they said they were prepared to increase the prominence of the RAPR by adding shadow to the lettering to render it clearer against the pale background.
Clearcast stated that in clearing the ad they had been satisfied by Sunny's argument that ad (a) contained no triggers requiring the inclusion of the RAPR. On that basis, the requirement in the Regulations that an RAPR be given greater prominence than the trigger did not apply. In respect of its legibility rather than specifically its prominence, Clearcast stated that the on-screen text during which the RAPR was presented passed their internal testing and that they had considered it to be clear, legible, of the required size and held on-screen for the required duration.
In respect of the decision to state the RAPR in ad (b) voluntarily (in the absence of any triggers), Clearcast stated that they had considered whether that action in turn necessitated the inclusion in the ad of a full representative example for the loan product. They noted that, according to the Regulations, any ad which included a rate of interest or any amount relating to the cost of the credit must also include standard information by means of a representative example. Ads were exempt from that provision where the only rate of interest or other amount relating to the cost of the credit was the RAPR itself, and where that RAPR was included as a consequence of its being triggered by other provisions of the Regulations. Clearcast explained that they had sought advice on this point from Sunny's legal advisor and supplied a copy of the response they had received. They said they had accepted the arguments contained therein as to why it was acceptable to voluntarily state the RAPR without providing a full representative example.
Assessment
1. Upheld
The ASA noted that Regulation 6(1)(a)(ii) required credit ads to specify the RAPR if they indicated in any way that any of the terms on which credit was available was more favourable than corresponding terms applied in any other case or by any other creditors. The ad featured a conversation between a potential customer seeking a loan and employees of an unnamed competitor payday loans company. The customer enquired about the availability of "Sunny rates ... rates that can drop the next time you borrow, just by making four on-time payments", and terminated the call when he found that the company did not offer loans on those terms. We considered that the implication of that conversation was that credit was offered by Sunny on terms more favourable than those applied by other creditors, and therefore that the ad included a comparative indication triggering the requirement to include the RAPR. We noted that at the end of the ad the customer was shown visiting the Sunny website on his laptop and considered that that reinforced the comparative aspect of the ad. We welcomed Sunny's willingness to include the RAPR in future versions of the ad.
Because the ad featured a comparative indication without stating the RAPR, we concluded that it breached the Code.
On that point, ad (a) breached BCAP Code rule 14.11 14.11 The advertising of unsecured consumer credit or hire services by consumer credit businesses or consumer hire businesses and / or credit brokering businesses or related credit services, such as debt counselling or debt adjusting is acceptable only if the advertiser complies with the financial promotions requirements imposed by FSMA and the FCA's rules set out in Chapter 3 of CONC.. The requirements for financial promotions set out in Chapter 3 of CONC do not apply: (a) where the credit is available only to a company or other body corporate (such as a limited liability partnership); (b) where a financial promotion is solely promoting credit agreements or consumer hire agreements or P2P lending agreements for the purposes of a customer's business; (c) to a financial promotion to the extent that it relates to qualifying credit or (d) it falls within the definition of an excluded communication as set out in the FCA's handbook. If the applicability or interpretation of these rules or provisions is in doubt, advertisers may contact the FCA. The FCA does not check financial promotions for compliance with the CONC rules before they are published. Such advertisements that involve distance marketing must also comply with the Financial Services (Distance Marketing) Regulations 2004 (as amended). Other distance-marketing financial advertisements are covered by the FCA Handbook. (Lending and credit).
2. Upheld
Clearcast had cleared ad (b) for broadcast on the understanding that it did not contain any triggers specifically requiring, under the Regulations, the inclusion of the RAPR with greater prominence than those triggers. They therefore considered that the RAPR had been included on a voluntary basis. We understood, however, that under Regulation 4(1) the voluntary inclusion of the RAPR (as a rate of interest or other amount relating to the cost of the credit) in such ads itself necessitated the inclusion of a representative example. We noted the information supplied to Clearcast on that matter, which argued that the RAPR was neither a rate of interest nor any other amount relating to the cost of the credit and therefore did not fall within the scope of that provision. However, we considered that it was clear from the wording of Regulation 4(2) ("... a rate of interest or other amount relating to the cost of the credit other than the representative APR") that the RAPR, if included in an ad voluntarily, fell within the scope of the provision and constituted a trigger requiring the inclusion of the full representative example.
Notwithstanding the above, we noted that ad (b) was similar to ad (a) in that it featured a conversation between a potential customer seeking a loan and an employee of an unnamed competitor payday loans company. We considered that the discussion between the two parties of the availability of "Sunny flexi-pay - that thing where you pick your repayment schedule", and the subsequent termination of the call by the customer, implied that the terms on which credit was available from Sunny were more favourable than corresponding terms applied by other creditors. We noted that the ad again showed the customer initiating contact with Sunny by bringing up the app on her mobile, thus reinforcing the comparison. We therefore found that the ad included a trigger requiring the inclusion of the RAPR. As such, there was no requirement for a full representative example to be presented.
Regulation 6(2) required that the RAPR, as triggered information, be given more prominence in the ad than the information that had triggered the requirement for its inclusion. The trigger (the comparative indication) included spoken as well as visual elements of the ad (the conversation, the termination of the call and the recourse to the Sunny mobile app). The RAPR was shown in small on-screen text that appeared at the bottom of the screen whilst the customer terminated the call and visited the app. We considered that the on-screen text was unlikely to draw viewers' attention to a greater degree than the scene itself, because the latter formed part of the main visual detail of the ad. We also considered that information communicated orally to viewers would generally be seen as being more prominent than on-screen text at the bottom of the screen, and that on-screen text at the bottom of the screen was therefore unlikely to be sufficiently prominent if the triggering information was orally stated. We acknowledged that each ad should be taken as a whole, but considered that the RAPR was not given greater prominence in the overall presentation of ad (b) than the comparative indication. We therefore concluded that the ad breached the Code.
On that point, ad (b) breached BCAP Code rule 14.11 14.11 The advertising of unsecured consumer credit or hire services by consumer credit businesses or consumer hire businesses and / or credit brokering businesses or related credit services, such as debt counselling or debt adjusting is acceptable only if the advertiser complies with the financial promotions requirements imposed by FSMA and the FCA's rules set out in Chapter 3 of CONC.. The requirements for financial promotions set out in Chapter 3 of CONC do not apply: (a) where the credit is available only to a company or other body corporate (such as a limited liability partnership); (b) where a financial promotion is solely promoting credit agreements or consumer hire agreements or P2P lending agreements for the purposes of a customer's business; (c) to a financial promotion to the extent that it relates to qualifying credit or (d) it falls within the definition of an excluded communication as set out in the FCA's handbook. If the applicability or interpretation of these rules or provisions is in doubt, advertisers may contact the FCA. The FCA does not check financial promotions for compliance with the CONC rules before they are published. Such advertisements that involve distance marketing must also comply with the Financial Services (Distance Marketing) Regulations 2004 (as amended). Other distance-marketing financial advertisements are covered by the FCA Handbook. (Lending and credit).
Action
The ads must not be broadcast again in their current form. We told Think Finance (UK) Ltd to ensure that ads which indicated in any way that any of the terms on which credit was available were more favourable than corresponding terms applied in any other case or by any other creditors also included an RAPR, and reminded them that the RAPR needed to be more prominent than the trigger information.
