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- Consumer Credit Act
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Current Issues
Advertising
In 2003, the Department of Trade and Industry published a White Paper 'The consumer credit market in the 21st century'. It announced the government's intention to introduce new laws relating to consumer credit advertisements. The 'Consumer Credit (Advertisements) Regulations 2004' introduced these new measures, which were designed to ensure greater consistency and transparency in credit advertising, so that consumers could compare financial products and make informed purchasing decisions.
The 2004 advertising regulations introduced some key changes:
- The requirement to ensure that advertisements are clear, fair and not misleading
- The previous categories of 'Simple', 'Intermediate' and 'Full' credit advertisements were abolished.
- The introduction of the calculation for the 'Typical APR'
- The requirement to display an APR where certain 'triggers' are used within the advertisement
- Minimum limits when advertising 'from' interest rates
- The requirement to display certain information with equal or greater prominence than certain 'trigger' information.
Qualifying credit
Whilst second charge loans are outside FSA regulation, some financial promotions for these will be inside FSA's remit as they are classed as 'qualifying credit'. 'Qualifying credit' is that provided by a lender who provides regulated mortgage contracts, where the loan is secured either partly or wholly on land. Therefore the term 'qualifying credit' includes second charge loans and buy to let mortgages where the lender is authorised by FSA in respect of lending or administration of first charge mortgages.
More information on FSA/OFT regulation of financial promotions
FSA has produced some FAQ's on financial promotions for credit - including what is regulated by OFT and what is regulated by FSA. View FAQs.
Credit Advertisements under the Consumer Credit Act regulations
AFB View
Many AFB members will provide access to both first and second charge mortgages. To our knowledge, all lenders who are authorised by the FSA for first-charge business, and are also active in the second-charge mortgage market, have set up separate legal entities for the sale of second-charge mortgages. Therefore, credit advertisements for their second-charge products will be regulated under the CCA regime. Members have told AFB that the inconsistencies between the FSA and OFT requirements make it difficult for them to produce compliant credit advertisements. AFB was asked to contribute to a review of the 2004 credit advertising regulations, and AFB's response to this raised these concerns. You can read AFB's full response by clicking here.
AFB will continue to lobby on behalf of members to raise awareness of the issues surrounding credit advertising in the second charge loan market. AFB will also provide help and support to members in creating compliant consumer credit advertisements.