Background
Summary of Council decision:
Two issues were investigated, both of which were Upheld.
Ad description
Two TV ads for on-line retailers offered credit on brand products:
(a) One ad promoted Littlewoods products. On-screen text read "Representative 0% APR. Credit subject to status, over 18s only". The voice-over stated, "Everyone can get the perfect gift this Christmas with interest-free low weekly payments." Large on-screen text then read "low weekly payments".
(b) A second ad promoted very.co.uk products. The voice-over and on-screen text both stated "Buy now pay later". The voice-over continued, "Get your presents now and pay nothing for up to 12 months on a huge range of Christmas gifts at very.co.uk." On-screen text stated "Terms and minimum spend apply. Credit subject to status. 18+".
Issue
The complainant challenged whether:
1. the representative APR in ad (a) was sufficiently prominent; and
2. ad (b) was required to state an APR.
Response
1. Shop Direct Finance Company Ltd, trading as Littlewoods.com and very.co.uk (Shop Direct), explained that the cost of all Littlewoods products could be spread over 20 weeks, or more for some products, on an interest-free basis. They noted that the voice-over stated, "Everyone can get the perfect gift this Christmas with interest-free low weekly payments" and stated that that was simply a reference to the fact that Littlewoods credit account customers could avoid paying the full cash price of Christmas upfront, instead spreading the cost, by making small weekly payments if they wished, using their interest-free credit terms. Shop Direct said the phrase "interest-free low weekly payments" in the ad compared the Littlewoods interest-free credit offer with the alternative option of paying the full cash price at the point of sale, rather than with any other credit term. They therefore did not consider that it constituted a comparative indication under the Consumer Credit (Advertisements) Regulations 2010 ("the Regulations"), which would require the inclusion of a representative APR ("RAPR") which was given greater prominence than the indication itself.
They said they had voluntarily included the text "Representative 0% APR", which they described as a rate of interest. They noted that the Regulations required the inclusion of a representative example in ads that contained a rate of interest, but said they had understood that ad (a) would be exempt from that provision because the only rate of interest given was the RAPR. They now recognised that such an exemption would only apply in circumstances where that RAPR was included by virtue of the requirements of the Regulations themselves, and not where it was given voluntarily.
2. Shop Direct noted that, under the Regulations, the ad would need to include an RAPR if it contained an incentive to apply for credit. They said they fundamentally disagreed with guidance issued by the Office of Fair Trading (OFT) as to the interpretation of an "incentive to apply for credit" as set out in the Regulations. They considered that the OFT, in the absence of any definition of the term "incentive" in the Consumer Credit Act 1974 or the Regulations, had applied the broadest interpretation possible. Shop Direct considered that an incentive to apply for credit must be something above and beyond a statement about the credit product itself, such as a free gift, and stated that that view was consistent with existing case law. They said the claim "pay nothing for up to 12 months" in the ad referred to a specific deferred payment credit offer and was a statement about the credit product itself rather than relating to any additional benefit. They therefore said the ad did not include an incentive to apply for credit.
In relation to both points, Clearcast said they had requested and received standard assurances from Shop Direct's legal advisor that the ads were compliant with the Consumer Credit Act. They considered that the issue was one of interpretation and stated that they saw no reason to believe that the legal view from Shop Direct's advisor was inaccurate. They felt that the complaint was misconceived and should not be upheld.
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, and that Regulation 6(2) required that RAPR to be given greater prominence than the indication. We sought comments from the OFT on the Regulations. The OFT commented that the claim "low weekly payments" was, in their view, a comparative indication and that the RAPR was not sufficiently prominent to satisfy the requirements of the Regulations. They stated that information in a voice-over was usually more prominent than on-screen text, and considered that the text "low weekly payments", when it appeared on the screen later in the ad, was more prominent than the RAPR because it was written in a larger, bold font. They also noted that the RAPR was shown before the claim was made, and was written in white on a moving multi-coloured background.
We noted that guidance published by the OFT stated that, in their view, references to "low" interest rates, APRs, fees or charges implied that those were "low" relative to something else or the generality; they could not be "low" in the abstract. The OFT therefore considered that such references were comparative indications triggering the requirement to include the RAPR.
We acknowledged Shop Direct's argument that the claim "low weekly payments" was made in relation to the cost of purchasing Christmas gifts and paying in full at the point of sale, rather than to the cost of other credit products. However, we noted that at the point the voice-over stated "low weekly payments", the same words appeared on screen. We considered that the effect of that delivery was to emphasise the claim "low weekly payments", in isolation from the earlier voice-over, and that viewers would be likely to interpret the claim as being made in relation to other credit products. On that basis, we considered that the claim "low weekly payments" equated to a comparative indication and that the ad should therefore include an RAPR which was more prominent than the claim.
We noted that the ad included on-screen text stating "Representative 0% APR". However, that did not accompany the claim "low weekly payments", but rather appeared before it was made. In contrast, at the point that the voice-over referred to "low weekly payments", that claim was accompanied by large text centred on the screen making the same claim. We therefore considered that the ad drew more attention to the claim "low weekly payments" than to the RAPR.
We further understood that the OFT considered the claim "0% APR" to be a rate of interest. Regulation 4(1) required ads stating a rate of interest or an amount relating to the cost of the credit to also include standard information by means of a representative example. Ads were exempt from this provision only when Regulation 6(1) applied and the only rate of interest or other amount relating to the cost of credit was the RAPR itself. We therefore noted that, were the ad not to have contained a comparative indication requiring (under Regulation 6(1)) the inclusion of the RAPR, it would have needed to include a representative example.
Because we understood that the ad included a comparative indication requiring the inclusion of an RAPR which held greater prominence than the indication itself, and because we did not consider that the RAPR was sufficiently prominent, we concluded that the ad breached the Code.
On that point, ad (a) breached BCAP Code rules 1.3 1.3 Advertisements must comply with the law and broadcasters must make that a condition of acceptance. (Compliance) and 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
We noted that, under Regulation 6(1)(b), credit ads must specify an RAPR if they included any incentive to apply for credit or to enter into an agreement under which credit was provided, and that that RAPR should be given greater prominence than the incentive.
We understood that the OFT considered the statement "Get your presents now and pay nothing for up to 12 months", which was part of the voice-over in the ad, was an incentive to apply for credit and therefore triggered the requirement to specify an RAPR.
We acknowledged Shop Direct's argument that the claim, "... pay nothing for up to 12 months" was a statement about the credit product itself rather than any additional benefit. We noted their reference to existing case law (the First-Tier Tribunal (Consumer Credit) in Log Book Loans v OFT) regarding the interpretation of an "incentive" under the Regulations. That Tribunal was concerned with claims relating to the speed at which credit could be obtained in the context of ads for a short-term loans company, and had concluded that an important factor was whether the degree and nature of the speed suggested was set out in some form of detail. The Tribunal had found that the ads under consideration were almost entirely a description of the basic products offered and, as such, the references to speed did not constitute an incentive.
In relation to the Tribunal, the OFT commented that they considered the decision (which they noted was not binding) did not provide detailed assistance as to the application of Regulation 6(1)(b) because it did not set out guidance as to what amounted to an incentive. They also pointed out that the Tribunal appeared to accept that the level of detail given could have a bearing on whether or not a reference to speed constituted an incentive.
We considered that the claim "Get your presents now and pay nothing for up to 12 months" went beyond a general description of the service on offer and, because it stated the details of one particular term on which credit was available, amounted to an incentive to apply for credit under Regulation 6(1)(b). Because the ad included an incentive, but did not show an RAPR as required by the Regulations, we concluded that it breached the Code.
On that point, ad (b) breached BCAP Code rules 1.3 1.3 Advertisements must comply with the law and broadcasters must make that a condition of acceptance. (Compliance) and 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.
