Summary of Council decision:
Two issues were investigated, both of which were Upheld.
A poster for DivideBuy, a buy now pay later (BNPL) credit services provider, seen on 21 February 2021 at the side of a football pitch, displayed the DivideBuy logo with the text “THE SMARTER WAY TO PAY”. Another poster on the hoarding behind it featured the text “DIVIDEBUY.CO.UK”.
1. The complainant, who believed the ad encouraged consumers to use credit with high penalties for late payments, challenged whether the claim “THE SMARTER WAY TO PAY” was irresponsible.
2. The ASA also challenged whether the ad made sufficiently clear that it offered a form of credit.
1. & 2. Rematch Credit Ltd t/a DivideBuy explained that all their credit agreements at the time were interest-free and for a maximum term of 12 months. They stated that meant that their credit agreements were exempt from regulation under the Consumer Credit Act 1974 and outside the FCA’s consumer credit regime.
DivideBuy stated that consumers paid no more by spreading the cost, provided the payments were made on time. They believed that could be described as “smarter”, as it was the same payment but over a longer period of time. They believed it would be a smarter payment method than choosing an alternative credit provider. DivideBuy explained that they did not make money from the consumer and the price the consumer paid for the goods was the same as if they had paid in full at the time of purchase.
DivideBuy explained that they issued a missed payment processing fee after 31 days. The processing fee was £30 and capped at two charges per agreement. They confirmed that there were no early repayment charges.
DivideBuy added that the website contained FAQs and other information if a consumer was interested and they believed that they would be fully informed. They stated that there was a full pre-contractual disclosure of information that a consumer had to confirm they had read and understood. DivideBuy explained that they had policies in place and credit arrears management for customers who encountered financial hardship during the loan.
DivideBuy clarified that consumers were credit and affordability checked before being granted credit. They also confirmed that they did not offer revolving credit limits to consumers to encourage repeat spending. DivideBuy added that the ad provided the website link and so consumers were able to look at the product further. They believed that consumers would clearly see on the website that DivideBuy was a form of credit and an individual could not sign up to and use DivideBuy without being fully informed of the associated risks. DivideBuy said that they believed that they were acting in a socially responsible manner, and in accordance with guidance set out by the Financial Conduct Authority. They said they believed that ensuring transparency with other financial Institutions enabled fair and responsible lending across the financial services industry as a whole.
DivideBuy commented that the majority of their retailer partners offered a soft search credit checking tool which allowed consumers to check their eligibility before proceeding to a full application for credit. DivideBuy stated that it was an individual’s own discretion to proceed to a full application for credit which involved a hard credit search. They added that they made it clear to the customer that a search would leave a footprint on their credit file and impact their credit score.
The ASA considered that the claim “THE SMARTER WAY TO PAY” suggested that using the service was a preferable method of payment for expenditures, compared to paying the full amount at once. The claim presented the product as a sensible, risk-free method for general spending, including non-essential purchases.
We considered that the ad encouraged consumers to use credit for non-essential purchases, when that may not be suitable for their circumstances. We concluded that the ad was socially irresponsible.
On that point, the ad breached CAP Code (Edition 12) rule 1.3 1.3 Marketing communications must be prepared with a sense of responsibility to consumers and to society. (Social responsibility).
The CAP Code required that offers of financial products must be set out in a way that allowed them to be understood easily by the audience being addressed. It also required that marketers should ensure that they did not take advantage of consumers' inexperience or credulity and that marketing communications state the nature of the contract being offered, any limitation, expense, penalty or charge and the terms of withdrawal. Alternatively, if a marketing communication was brief or general in scope, free material explaining the offer must be made readily available to consumers before a binding contract was entered into.
We understood that DivideBuy operated as a credit agreement service and users were subject to potential penalties if they failed to make payments on time. We also understood that applications involved a ‘hard’ search of an applicant’s credit file, which could affect their credit score.
The name “DivideBuy” made reference to splitting payments rather than paying in one instalment, which would indicate to some consumers that the product involved borrowing money, and therefore being in debt. However, we considered that these types of payment methods were less familiar to consumers than more traditional forms of credit, such as credit cards, and they therefore may be less aware that they were a type of debt. We noted that consumer research by the Financial Conduct Authority and Citizens Advice showed that many consumers did not associate BNPL services with credit, and more closely associated them with cardless payment technologies that did not involve credit. A large proportion of users reported having used BNPL services in error. That indicated that consumers were less familiar with the nature and risks of using such products – in contrast to products such as credit cards, which had been around for many decades and included elements in their advertising that were likely to signal their nature to consumers, such as images of cards, references to APR, or even certain very well-known brand names.
In that context, we did not consider that the description of the product as involving payment in instalments to make sufficiently clear that the ad promoted a product that involved a type of debt, in the absence of a more explicit statement to that effect.
The ad appeared on a hoarding at the side of a football pitch that was designed to display a short message, in very large letters so that it was visible at a distance by spectators in the stadium and on television. In addition, the ad only featured the brand name, DivideBuy, and a general strapline, without referring to any specific products. We therefore considered both that the ad was general in scope, and that the medium was genuinely limited in terms of space. For those reasons, we expected information regarding the nature of the product to be made readily available to consumers, for example by means of a web page URL.The hoarding behind the one directly next to the pitch stated “DIVIDEBUY.CO.UK”. We considered that both hoardings would be visible to most spectators and that they would be seen as part of the same ad, and in theory it was an appropriate position in which to place a signpost to further information. However, the URL was for the home page of the DivideBuy website, where text halfway down the page stated that it was “interest free credit”. We did not consider that was sufficiently prominent to make clear that the product was a form of credit. Information on the specific risks associated with the product could be found on the FAQs page, which was linked to at the bottom of the page.
On that basis, we concluded that the ad did not make clear the nature of the product, and failed to set out an offer for a financial product in a way that allowed it to be easily understood by the audience being addressed.
On that point, the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.9 (Qualification), 14.1 14.1 Offers of financial products must be set out in a way that allows them to be understood easily by the audience being addressed. Marketers must ensure that they do not take advantage of consumers' inexperience or credulity. and 14.2 14.2 Marketing communications should state the nature of the contract being offered, any limitation, expense, penalty or charge and the terms of withdrawal. Alternatively, if a marketing communication is short or general in its content, free material explaining the offer must be made readily available to consumers before a binding contract is entered into. (Financial products).
The ad must not appear again in the form complained about. We told Rematch Credit Ltd t/a DivideBuy to ensure that ads for credit products were socially responsible and made the nature of the product sufficiently clear.