The Financial Services Authority’s (FSA) recent review of website advertising contained both good and bad news.
The good news was that of the 130 visits it made to 77 firms’ websites, three-quarters met the required standards and the FSA acknowledged that standards had improved following its reviews in 2005 and 2006. The bad news is 25 per cent failed to present information in a fair, clear and not misleading way.
In a statement published by the FSA, Dan Waters, director of retail policy and themes, said: “For many people, the internet is the channel of choice for shopping around for financial products. However, it can expose consumers to high risk as they are able to make instant purchases without advice. This is why it is so important that firms’ websites are fair, clear and not misleading.
“Although many firms’ website-based promotions are meeting our requirements, we expect the senior management of all regulated firms to ensure their customers are treated fairly and we will be looking at promotional websites again early next year to make sure that firms have taken our findings on board and are taking website design seriously.”
Making good sense
So, if you have a website it makes good sense to review it regularly to ensure it complies with the financial promotions rules, before the FSA conducts its next review. A good starting point is to visit the FSA’s own website at www.fsa.gov.uk, and refer to the Financial Promotions section. It has some very helpful feedback from its various reviews, which includes examples of both good and bad practices.
A key point to bear in mind is that websites are subject to the same rules as other forms of qualifying credit promotion. Do ensure your website is clear, fair and not misleading and assume no or little specialist financial knowledge on behalf of the user.
When it comes to designing your site you need to ensure that due prominence is given to certain pieces of information such as risk warnings, APRs and regulatory statements. Consider factors such as text size, colour and position on the web page as these are all factors which contribute to ‘due prominence’.
On the subject of due prominence, you may want to use the FSA logo on your website, but I’m afraid that is not possible. It is OK to use it on letterheads and e-mail equivalents, but you cannot use it to endorse products, services or communications and it cannot be used on paper based promotions or on your website. You must also write ‘Financial Services Authority’ in full the first time the FSA is mentioned.
Additional factors
There are also a few additional factors you need to take into consideration. Firstly, when a consumer looks at an individual web page, all the relevant information should be visible on the same page – the consumer should not have to scroll down or click onto a link page in order to view additional information. Secondly, there is an extended regulatory statement for use on websites; do make sure you’re using the correct one.
Any banner adverts or hyperlinks used on the internet to promote your services fall within the Financial Promotions rules, so ensure they are properly checked. If you are using links to and from your website, make sure the consumer is given a clear warning that they are leaving your site and that the site they may be clicking through to meets the website compliance requirements. The same record keeping principles that apply to advertising also apply to websites.
Causing problems
APRs are one of the areas which have caused problems in the past for intermediaries, particularly when it comes to quoting representative APRs for specialist mortgages. Any qualifying credit promotion which includes price information such as product interest rates, payment of fees or charges, or references to the frequency or amount of repayments, must quote an APR. If you are promoting a range of products rather than a specific one then you need to quote a ‘representative APR’.
Likewise, any promotion making reference to the availability of credit to groups of individuals who may otherwise consider such access restricted e.g. CCJs, the self-employed, council tenants, bankrupts, etc, must also quote an APR for the product or range of products in question. If no product is mentioned or if it is for a range of products, then a representative APR should be shown.
When promoting specialist mortgages a representative APR must be quoted, even if you do not mention interest rates anywhere in the promotion. This must be equal to or lower than the APR which 66 per cent of people responding to your promotion would expect to pay, if they entered into the mortgage contract which is the subject of the promotion.
When determining the representative APR, account should be taken of the business which has arisen from similar promotions made by the firm in the previous 12 months and where the promotion is for a new product, reference should be made to relevant business plans. The FSA will be taking another look at websites next year, so do make sure your site is fully compliant.
