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Clear steps to fair web advertising

Website promotions are under scrutiny again and FSA regulations spell out the dos and don’ts of staying compliant. Bill Warren looks at the five key requirements for promotional material

At a Mortgage Business Expo seminar recently, Chris Atkinson, manager of the communications and strategy team for financial promotions at the Financial Services Authority, issued a reminder that financial promotions – especially those on websites – are once again under scrutiny. Have any improvements been made since the last review was published in February 2005?

Discussion of financial promotions usually seems to centre on issues such as the large number of non-compliant advertisements. Mortgage firms that take the time and trouble to comply with the rules are at a competitive disadvantage, while non-compliant advertisers can continue their activities apparently unchecked.

While this is undoubtedly a concern, I would like to leave it to one side and instead look at what the FSA says specifically about website financial promotions and how we can all make sure we are compliant in this respect.

Among the key areas mentioned as being of concern were the prominence of the APR quote; the prominence of risk warnings; the disclosure of fee information; and the unauthorised use of the FSA logo. Taking the last of these first, use of the FSA’s logo by authorised firms is comprehensively covered in the Handbook in GEN 5 Annex 1.

Here, it is clearly stated that the FSA logo can only be used within a letter, or electronic equivalent, as part of a statement that the firm is authorised and regulated by the FSA. Use of the logo on any material, and in this case financial promotions, that could be construed as endorsing the firm and its products or services is specifically prohibited.

Regarding the first three issues, the point about web-based financial promotions is that they are subject to the same rules as printed material and a few extra ones besides. Reminding ourselves of the basic requirements, the right place to start is MCOB 3, where the rules for APR inclusion, risk statements and disclosure of fees are all found in section 3.6.

At MCOB 3.6.17, we are reminded that an accurate APR figure must be included in connection with price information for specific products, or where reference is made to the availability of the product to customers with restricted access to credit.

The APR reference must be no less prominent than the price information – or the availability to those with restricted credit access – and it must directly follow the price information. It must always be placed in the following phrase: “The overall cost for comparison is X% APR”.

Risk warnings are covered in 3.6.13 and are clearly set out for all to follow with ease. Declaration of fees is covered in 3.6.27 – again with simple requirements to state the amount of the fee, or a representative or estimated fee.

Specific reference to financial promotions via the internet and other electronic media is made in MCOB 3.12, which points out that these media can be both real time and non-real time, and that the rules related to printed material apply equally to websites.

Those who communicate financial promotions via electronic media are also reminded that they are bound by additional regulations such as the Data Protection Act, the Computer Misuse Act, and the ITC Code of Advertising Standards and Practice if advertising on TV.

The related perimeter guidance, PERG 8.22, goes into greater depth regarding the role of software engineers, internet service providers and hypertext links. In addition, of course, internet and electronic financial promotions are subject to the same sign-off procedures and record-keeping requirements as their printed counterparts.

As ever, it is easy to get immersed in the fine detail and lose sight of the bigger picture. The underlying principles are summarised in the introduction to the February 2005 progress report, where the financial promotions work is firmly tied into the Treating Customers Fairly theme. Five key requirements for financial promotions are clearly set out.

These are that financial promotions material must be clear, fair and not misleading; it must provide a balanced picture of the product and services; it must match what the end product delivers; it must be appropriate for the target audience; and it must be easily understood by customers.

Keeping these five ideas in mind may not make it any easier to get the detail right but it does help to keep it in perspective as ultimately creating a fairer environment for customers.

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