A TV ad for an online retailer offered credit on brand products. The voice-over and on-screen text both stated "Buy now pay nothing for 12 months". Further on-screen text stated "Credit available, subject to status. On orders over £250. 18+ only".
The complainant challenged whether the ad was required to state an APR.
Shop Direct Finance Company Ltd (Shop Direct), trading as isme.com, acknowledged that the Consumer Credit (Advertisements) Regulations 2010 ("the Regulations") required that ads which included incentives to apply for credit specify a representative APR ("RAPR"). They stated, however, that 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 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.
Clearcast said they had requested and received a standard assurance from Shop Direct's legal advisor that the ad was compliant with the Consumer Credit Act and did not require the inclusion of an APR. They were satisfied that the ad did not contain any incentives to apply for credit and was therefore not in breach of the BCAP Code.
The ASA noted that Regulation 6(1)(b) required ads to specify an RAPR if they included any incentive to apply for credit or to enter into an agreement under which credit was provided, and further that that RAPR should be given greater prominence than the incentive.
We sought comments from the OFT as to the statement "Buy now pay nothing for 12 months", which appeared both on screen and in the voice-over. They stated that in their view that was an incentive within Regulation 6 and therefore triggered the requirement to include an RAPR.
We acknowledged Shop Direct's argument that the claim "... pay nothing for 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) which dealt with 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.
The OFT stated that the Tribunal did not set out guidance as to what amounted to an incentive and that therefore they did not consider the decision (which they noted was not binding) provided detailed assistance as to the application of Regulation 6(1)(b). They also commented 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 noted that the ad stated "Buy now pay nothing for 12 months", in both the voice-over and in large on-screen text. We considered that that went beyond a general description of the service on offer and, because it gave details of one particular term on which credit was available, this 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.
The ad 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).
The ad must not be broadcast again in its current form.