Given that so much information needs to be provided for each mortgage product, it is likely communicators will seek innovative ways to promote financial products.
The amount of information an advert needs to convey means they are likely to become much simpler in format, and comparison tables could become more prevalent.
Communicators may also completely side-step promoting specific products, and instead become more service orientated and refer to the depth and range of products available. Alternatively, they may focus on how much they understand their customers needs.
The channels of communication may also change. The amount of information that a quarter page advert can contain is limited, and advertisers might struggle to advertise complex products effectively. Equally, printed material detailing products can go out of date. All product data needs to be recent, so the life span of printed communications will become a significant issue when considering printing costs. Email might become a more effective means of communicating complex promotions, but strict rules govern these and emails must be solicited by the recipient. Websites can also provide a convenient means of conveying lots of information, but again communicators must ensure they keep their websites up to date. Equally, websites must be updated to ensure they reflect the rules in MCOB 3.
Mortgage regulation has required introducers to revise and reconsider the information they provide to clients, and ensure they promote themselves in a formal, clear and accurate fashion. Introducers have worked hard to ensure they were able to work past Mortgage Day. Many have taken advantage of the three-month transitional period and have attributed less time to ensuring promotional activities are compliant. But while introducers can use the lull in the mortgage market around this period to get their house in order, introducers who want to prosper past January 2005 must now ensure promotional activities are compliant.
So what promotional activities are likely to fall under the scrutiny of the Financial Services Authority? The FSA states that its rules for financial promotion, which are explained in MCOB 3, apply to any firm that promotes a product that is subject to the recipient qualifying for credit, and covers not just regulated mortgage contracts, but also stretches to products that combine secured and unsecured loans. But the rules don’t just cover any attempts your firm makes to promote a financial product; they also extend to any communications that you approve to be disseminated by a third party.
But, while the FSA has implemented strict rules to govern communication activities that promote products or make certain types of claims (such as suggesting the current economic climate will continue unchanged), certain communication activities are not covered by MCOB rules. For example, the rules do not apply to basic generic adverts that state the firm’s name, logo, contact point and a brief statement describing the firm’s main occupation. Equally, TV and broadcast communications that are not primarily intended to promote lending, and photographic and cinematographic exhibitions are not subjected to these rules.
The FSA divides communication activities between real time and non-real time promotion. Real time refers to situations in which you explain a qualifying credit promotion to a client, either in person on the phone or by any other means of interactive dialogue. Non-real time describes situations in which the qualifying credit promotion is open to more than one person under the same terms, and the recipient does not have to respond immediately and has a record of the offer. This refers to any static promotion and includes examples of qualifying credit promotions made by letter or email, or contained in a printed advert, publication, website, or TV or radio adverts.
The rules will create a number of challenges for communicators; not least how to create engaging adverts that contain a lot of information. After all, people tend to flick through printed ads, taking in several messages in a short space of time. Yet ads must now contain a variety of risk statements, clearly state the APR where applicable and make reference to any conditions that might affect an applicant’s access to credit. And adverts for multi-rate products must provide equal prominence to all of the rates that will apply (that is all rates must be of the same size and be as noticeable). Introducers also need to ensure they clearly indicate any fees that will be charged and the amount, if known, as well as any relevant conditions, redemption charges and additional fees.
Advertising and other communications that are used to measure a company’s products against those provided by its competitors will become text heavy. Any comparison must be for products that are designed to meet the same person’s needs, and must objectively compare and verify any relevant information. Another design issue for creating communications for qualifying credit promotions is caused by the emphasis on presenting a balanced argument. Any message that describes the benefit of a promotion must be swiftly followed by the downside, and equal prominence must be given to both.
The information contained in any communication must be accurate and clear. The new rules will also end a few terms – mortgage guaranteed, pre-cleared, and no deposit claims will be policed by the FSA, and must not be used unless they are 100% accurate. The FSA has also said that communications must use plain language and should be clearly legible (or audible).
The shelf life of information is now an important issue and promotions must take into account changes in the economic climate, adjustments to variable product rates and other factors that may cause statements to go out of date. Firms are also responsible for the accuracy of any information disseminated by third parties, and it is their responsibility to inform those third parties if the information they disseminate on the firm’s behalf goes out of date.
It’s not just non-real time financial promotions that come under the FSA’s microscope. Face-to-face, telephone and other interactive interfaces are also regulated means of communicating qualifying credit promotions. Anyone involved in dialogue promoting a product to a client must do so in a clear, balanced and accurate fashion, and ensure they do not make any untrue claims or distort the purpose of the promotion. This could have an effect on promotions to win a car by applying for credit for example, and those carrying out promotions may need to undergo further training.
It will be interesting to see which companies succeed in promoting themselves in a regulated environment, which ones will fail and which will just side-step the whole issue.