It has been designed to give an overview of common errors on non-conforming promotions and how these can be addressed to help create compliant financial promotions.
Earlier this month the Financial Services Authority (FSA) published a progress update on its financial promotions work. The report also included information on the future direction of the regulator’s work, outlining a number of key areas it would focus on. One of these was the financial promotions produced by mortgage intermediaries, in particular non-conforming promotions from small broker firms.
In light of the upcoming focus in this area, AMI’s factsheet covers the FSA’s specific financial promotions requirements and outlines the common errors the regulator has uncovered in non-conforming promotions. These include: omitting or not using a correctly calculated annual percentage rate (APR) plus the APR not being prominent enough; missing risk warnings or risk warnings which were inaccurate or not prominent enough; missing or incorrect fee disclosure information; and a lack of balance – promotions listing the benefits but not the potential downsides.
The factsheet therefore covers the following areas:
APR requirements.
Risk warnings.
Fee information.
Prominence.
Balanced information.
The financial promotions approval process.
Record-keeping
Also included are examples of compliant non-conforming promotions and a list of areas to consider around the approval process and the use of management information in formulating promotions. An MCOB 3 ‘Road Map’ is also included – this is a high-level reference list detailing the area intermediaries should refer to when looking for specific rules and guidance.
Rob Griffiths, associate director of AMI, commented: “The FSA’s progress update stressed the need for improvement from mortgage intermediary firms in the standard of their financial promotions, particularly in the non-conforming sector. It singled out non-conforming financial promotions as potentially targeting more vulnerable customers and therefore felt it needed to focus specifically in this area, especially on those promotions produced by smaller broker firms. AMI has therefore decided to produce this factsheet to help members with their compliance responsibilities.
“The regulator has issued a warning that it will not just focus on repeat offenders but those firms who have failed to grasp, or show awareness, of the rules. Any firm unsure of the specific non-conforming financial promotions rules should use the factsheet, in conjunction with the rules and guidance, to ensure their promotions are fully compliant and clear, fair and not misleading. FSA have historically adopted an educational stance in this area but the threat of enforcement action is there for those firms who continue to flout the rules.”
