A TV ad, for Sunny short-term loans, featured scenes of a market trader at work. The voice-over stated "When Ben needed money to expand his market stall, he turned to Sunny. Because they give him the flexibility to repay early, without penalties … Discover Sunny.co.uk today. The flexible way to borrow from £100 up to £2500". On-screen text stated "Warning: Late repayment can cause you serious money problems. For help go to [website address]" and "Subject to status and a credit assessment. Terms and conditions apply. 18+".
1. Three complainants, who noted the ad did not reference the Annual Percentage Rate (APR) of interest, challenged whether the ad was compliant with the rules for advertising financial products; and
2. The ASA challenged whether the claims "[Sunny] give him the flexibility to repay early, without penalties" and "the flexible way to borrow" breached the Code by presenting rights given to consumers in law as a distinctive feature of the advertiser's offer.
1. Elevate Credit International Ltd t/a Sunny did not consider that the ad contained any trigger which would require the inclusion of the representative Annual Percentage Rate (RAPR), under the rules set out in the Financial Conduct Authority's (FCA) Consumer Credit Sourcebook (CONC). Regarding the claims about the flexibility of early repayments with Sunny, they noted that the Consumer Credit Act 1974 permitted debtors to repay their loans early. They stated that the inclusion of information about a statutory right did not amount to an incentive to apply for credit, which would be a trigger requiring the RAPR, and it was a matter of fact that there was inherent flexibility within that legal right. Such flexibility was therefore not a distinctive feature of the product and therefore did not trigger the inclusion of the RAPR. Sunny commented that, rather, an incentive was some form of special treatment or "add-on", as was indicated in existing case law. Sunny said they had considered CONC carefully and believed there was no incentive in the ad, and so nothing that triggered the requirement for the RAPR to be included. They said the matter was a highly technical one but, on reflection, they appreciated that the whole claim "... he turned to Sunny. Because they give him the flexibility to repay early, without penalties" might be seen to suggest that only Sunny gave that flexibility. They had not considered that interpretation in creating the ad but had instead sought to describe how the statutory right given by the Consumer Credit Act worked in relation to a Sunny loan.
Clearcast noted that there was no requirement that every ad for a financial product should include an RAPR. They supplied a copy of an opinion submitted to them by Sunny's legal team regarding the compliance of the ad and said they had been satisfied with Sunny's strong assurance that no triggers had been included in the script.
2. Sunny said a feature that set them apart from many of their competitors was that customers were able to change their repayment terms, allowing them to repay early, in part or full, at any time. They could do so without notice in order to reduce the amount of interest they would pay. Interest was applied daily on outstanding amounts and where early repayment was made, less interest was paid than was due under the original agreement. The Consumer Credit (Early Resettlement) Regulations 2004 set out the circumstances in which consumers were entitled to a rebate if they exercised their right to pay early but the Regulations did not apply to their product. Sunny were therefore not required to reduce the amount of interest customers paid when they repaid early, whereas in other cases consumers could in effect be penalised for early repayment. However, Sunny customers benefitted, by making a saving on that interest. They considered that to be a separate feature to the contractual right afforded under the Consumer Credit Act 1974 (whereby creditors must allow for the early repayment of a loan and were entitled to seek a compensatory amount for that repayment only where certain criteria were met) and believed it was presented in a tone consistent with the rest of the ad, and was not exaggerated.
They believed the ad did not suggest that other companies imposed a fee for early repayment, but that they elected not to, because to do so would suggest that to charge such a fee was legally permissible. They believed the ad as a whole did no more than create the impression that it would not cost consumers more if they repaid early. While they recognised on reflection that the ad did not convey well the position in relation to the reduction of interest when early repayment was made, they believed the ad did not exaggerate the fact that there was a benefit to consumers when they repaid early. Sunny believed that different interpretations were unavoidable where such a complex matter was concerned however they had properly considered the rules and had arrived at the conclusion that their interpretation was a valid one.
Clearcast considered the ad merely explained how the service worked to consumers who might not understand short-term borrowing. For those who were less financially-minded, the ad could offer reassurance that the process was not always rigid and it used descriptive language to explain what viewers could expect from using Sunny loans, in a way that did not exaggerate. They strongly believed that the ad complied with the Code.
1. & 2. Upheld
The ASA noted that, according to CONC, ads for financial products which included certain triggering information also needed to include the RAPR. Such information included an incentive (including but not limited to gifts, special offers discounts and rewards) to apply for credit, or enter into agreement under which credit was provided, or an indication that any of the terms on which credit were offered were more favourable than corresponding terms offered by other lenders.
The ad stated that the character had "... turned to Sunny. Because they give him the flexibility to repay early, without penalties … The flexible way to borrow from £100 up to £2500". We considered the references to flexibility, and to early repayment without penalties, amounted to an incentive to apply for credit, in which case the RAPR should have been included. We also considered the claims suggested those features were unique to Sunny, and as such not available via their competitors, and therefore also constituted a comparative indication. We considered the RAPR should therefore also have been disclosed for that reason.
Notwithstanding that, we understood that if Sunny customers repaid their debt early, they could make a saving on the interest they would otherwise have paid and that Sunny were not obliged to offer such a saving. However, we considered "without penalty" went further and suggested Sunny customers would avoid having to pay an additional "penalty" fee for early repayment, but that they would have to pay such an additional charge elsewhere. We noted that the ability to repay early and without additional charge was a right offered by the Consumer Credit Act and, as such, not a distinctive feature of Sunny's product. We therefore considered the ad misleadingly presented a right given to consumers in law as a distinctive feature of Sunny's offer. We concluded the ad breached the Code.
The ad breached BCAP Code rules 3.13 3.13 Advertisements must not present rights given to consumers in law as a distinctive feature of the advertiser's offer. (Exaggeration) 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).
The ad must not be broadcast again in its current form. We told Sunny not to in future present a right given to consumers in law as a distinctive feature of their offer. We also told them to ensure future ads that included a comparison or incentive displayed the RAPR.