Background
Summary of Council decision:
Two issues were investigated, of which one was Upheld and one Not upheld.
Ad description
A TV ad for AutoMoney, which offered secured loans on your car, featured a number of testimonials from their customers talking about their experience in borrowing money from AutoMoney. On-screen text stated "Real customers - not actors". Larger on-screen text stated "Why do real people trust AUTOMONEY". The first customer said, "Getting finance in the past was a bit of a problem ..."; the ad cut to the next one who said, "But ..., when I got in contact with AutoMoney, they were very friendly ..." The ad cut to another customer who said, "AutoMoney made it really simple..."
On-screen text appeared which stated "Loans secured on your car. Subject to status and affordability. Age 18 years or over". A customer said, "The application process was very easy to understand ..." and then the ad cut back to another customer who said, "They looked at my incomings and my outgoings ..." Another customer then said, "And they made sure I could afford monthly repayments."
On-screen text stated "Loan funds by bank transfer within one hour of acceptance during normal banking hours". A customer said, "They treated me as an individual ..."; followed by another customer who said, "... and I had the money in my bank account within the hour." Larger on-screen text stated "nothing to repay for 60 days" and appeared when a customer said, "Nothing to pay for 60 days was very helpful"; and another said, "It helped me get myself back on my feet ..." A further customer said, "It give us that little bit of leeway to make sure we could get that first payment together."
The ad then featured on-screen text which stated "Representative 493.94% APR" and then showed the customers explaining why they had taken out a loan "I used my loan for a little holiday"; "to help my mother-in-law come over from New Zealand"; and "to buy bits for my Morris Minor". The ad then featured three customers who shared their views on the company, saying, "I just think they're absolutely great"; "AutoMoney is just a fantastic company"; and "Great people to deal with."
Issue
1. A viewer challenged whether the Annual Percentage Rate (APR) was sufficiently prominent.
2. The ASA challenged whether the ad was irresponsible because it marketed high interest loans for non-essential purposes.
Response
1. Quick Click Loans Ltd (AutoMoney) said the requirement to show the representative Annual Percentage Rate (APR) was detailed in regulation 6(1) of the Consumer Credit (Advertisement) Regulations 2010 (the Regulations). It required the representative APR to be included when the ad "… indicate[d] in any way … that credit [was] available to persons who might consider their access to credit restricted, or (ii) any of the terms on which credit [was] available was more favourable than corresponding terms applied in any other case, or (b) include[d] any incentive to apply for credit …". They added that under regulation 6(2) of the Regulations, the representative APR was to be given more prominence than any indication or incentive of the kinds referred to in regulation 6(1) above.
AutoMoney included the representative APR because they believed there were a number of potential APR triggers (information which triggered the requirement to include the representative APR). They identified those potential triggers as the claim "Getting finance in the past was a bit of a problem", claims about the speed of the transfer of funds and the references to paying nothing for 60 days.
Automoney said it was arguable, however, whether the reference to the speed in which consumers received their funds amounted to an incentive under regulation 6(1). On that point, they referred to the Office of Fair Trading's (OFT) Payday Report, published in March 2013 which included an annex in relation to their advertising sweep of websites. They noted the OFT's view that references to speed could constitute an incentive, thereby triggering the requirement to include the representative APR. In that report, the OFT had noted the ASA had previously adjudicated that in the circumstances of that particular case, references to speed in a TV ad amounted to a description of the inherent features of the service, rather than an incentive to apply for credit. On that basis, they were satisfied that the reference "… I had the money in my bank account within the hour" was not an incentive and did not trigger the requirement to include a representative APR. They thought it was arguable also that the reference to pay nothing for 60 days was an incentive for the purposes of regulation 6(1).
AutoMoney said the requirement to give the representative APR greater prominence than the trigger was satisfied if it was more prominent than any of the potential triggers. They noted that regulation 6(2) stated "... the representative APR shall be given greater prominence than any indication or incentive of a kind referred to in regulation 6(1)...". They noted there was no requirement to look at the potential triggers cumulatively.
AutoMoney said the text "Representative 493.94%" appeared on screen for nine seconds on a fully continual basis, which they said represented about a quarter of the ad's duration. They noted that was longer than both of the potential triggers ‒ "Getting finance in the past was a bit of a problem" and "Nothing to repay for 60 days was very useful" ‒ which appeared in the voice-over for three seconds. It also appeared for longer than the potential trigger "Nothing to pay for to 60 days", which appeared in larger on-screen text for six seconds.
They believed the representative APR text was of a good size and in white font, which was clearly distinguishable from the background, and they believed it was in a good position on the screen. They believed that because of the length of time the APR text appeared on screen, it was more prominent than the potential triggers. They believed that having the representative APR information towards the end of the ad left a greater impression with the viewer than information shown earlier in the ad, which added to the increased prominence of the representative APR. Although some of potential triggers appeared in the voice-over, they noted there was no requirement to also have the representative APR in the voice-over.
Clearcast received a well-considered assurance that the ad complied with the Regulations It identified what in the ad could be considered a potential trigger and what would be required if that were the case. They tested the legibility and hold duration of the representative APR text and they agreed with AutoMoney's comments about the duration of hold. They noted that no other text appeared on screen while the representative APR information appeared that would distract the viewer from that information. They regarded that as being compliant in terms of prominence and as such, they cleared the ad for broadcast.
Clearcast added that whether something was considered to be an incentive was subjective and that while the OFT had, in the past, indicated what would be an incentive, the advertiser believed there was disagreement within the industry with the OFT's interpretation. They also noted that the only case law on that subject was a Consumer Credit Tribunal preliminary decision where the OFT were defeated in their interpretation.
2. AutoMoney did not consider the ad was irresponsible. The ad made clear that loans were subject to status and affordability and that was highlighted by the customers' claims "they looked at my incomings and outgoings" and "they made sure I could afford monthly payments". They believed that, regardless of the reason for taking out a loan, the message was clear that a loan would only be granted if the customer could afford to repay it.
AutoMoney explained their loans were repaid over 18 months in monthly instalments. All loan applicants had a face-to-face interview at one of their stores, with details about their income and outgoings recorded. They explained that the decision to grant the loan was made through individual manual underwriting. They added that the consumer's disposable income was determined and that the amount of the loan repayments could not exceed a percentage of the monthly disposable income. They believed the ad was responsible because there was clear emphasis that customers were assessed for affordability and had portrayed borrowing money in a responsible manner.
Clearcast noted the advertised loan was one secured on the consumer's vehicle and the value of the loan was calculated on that basis. They believed the reasons for taking out a loan and whether that constituted a necessity was entirely subjective. They said buying a flight from New Zealand was not a light expense and obtaining parts for a car so that it could run would be regarded as a necessity by the car's owner. They noted that while the ad may have featured items which might be regarded as luxuries or non-essential, what mattered was the context of the ad and whether it promoted the use of credit in a responsible manner. They believed the ad did not suggest that AutoMoney promoted the use of their product to customers for whom it would be unaffordable and the visuals and dialogue did not encourage irresponsible borrowing in any way.
Clearcast said the ad made clear that the loan was subject to the consumer's status and affordability; it highlighted that AutoMoney ensured the consumer could afford repayments before taking out the loan and gave consumers extra breathing space before needing to make the first payment. They did not believe the ad breached the Code.
Assessment
1. Upheld
The ASA noted the ad was for a consumer credit service and therefore it was required to comply with the relevant consumer credit legislation, the Regulations. AutoMoney believed the ad included three potential triggers for the requirement to include the representative APR: a reference to difficulty in obtaining credit; the speed with which funds were transferred to the customer; and the reference to paying nothing for 60 days.
We sought a view from the OFT on compliance with the Regulations and we considered whether the ad included any triggers that required the inclusion of the representative APR, and if so, whether it gave greater prominence to that representative APR.
We considered whether the claim "Getting finance in the past was a bit of a problem" was likely to be seen as the customer believing their access to credit was restricted, even if in reality that was not the case. On that point, we understood the key question was whether the individual believed that was the case, rather than whether that was in fact the case. We considered the claim "Getting finance in the past had been a bit of a problem" indicated that person believed their access to credit might be restricted and as such, it acted as a trigger to include a representative APR under regulation 6(1)(a)(i).
We then considered whether the claim "... I had the money in my bank account within the hour" constituted an incentive under regulation 6(1)(b). AutoMoney believed that was not the case and we noted their reference to existing case law (the First-Tier Tribunal (Consumer Credit) in Log Book Loans v OFT) regarding the interpretation of an "incentive" under the Regulations. That Tribunal was concerned with claims relating to the speed at which credit could be obtained in the context of ads for a short-term loans company, and had concluded that an important factor was whether the degree and nature of the speed suggested was set out in some form of detail. The Tribunal had found that the ads under its consideration were almost entirely a description of the basic products offered and, as such, the references to speed did not constitute an incentive.
In relation to the Tribunal, the OFT commented that they considered the decision (which they noted was not binding) did not provide detailed assistance as to the application of regulation 6(1)(b) because it did not set out guidance as to what amounted to an incentive. They also pointed out that the Tribunal appeared to accept that the level of detail given could have a bearing on whether or not a reference to speed constituted an incentive. We considered the reference to speed in this case was a factual observation from the customer and was an inherent feature of the service, once the loan had been approved. For that reason, we concluded the claim was not an incentive for the purposes of regulation 6(1) and did not trigger the requirement to include a representative APR.
Finally, we considered whether the on-screen text "nothing to repay for 60 days" and the testimonial "Nothing to pay for 60 days was very helpful" triggered the requirement to include the representative APR. While we acknowledged that it was a factual observation, we considered, however, that the claim went beyond a general description of the service on offer and, because it stated the details of the terms on which the credit was available, it amounted to an incentive to apply for credit under Regulation 6(1)(b). Because we considered that on-screen text constituted an incentive, we concluded it triggered the requirement to include the representative APR.
The ad included the representative APR using on-screen text and regulation 6(2) required it to be given greater prominence than the trigger information. In this case, we considered those triggers were the references to difficulty in obtaining credit and the claims to pay nothing for 60 days. While we acknowledged the Regulations did not require the representative APR to appear in the voice-over, it was required to be more prominent than any of the information that triggered its inclusion. We therefore considered whether the on-screen text gave the representative APR greater prominence than the triggers.
Two triggers appeared in the voice-over which we considered, in general, was likely to be seen as more prominent than on-screen text appearing at the bottom of the screen. We acknowledged the representative APR appeared on screen for longer than those triggers, but while that was the case, it appeared 25 seconds and 6 seconds after the triggers. It also appeared on screen at a time when the customers were explaining why they liked AutoMoney and information about how many customers AutoMoney had helped and after three other sets of on-screen text. One trigger appeared in on-screen text in the background behind one of the customers. While the text "493.94%" was in larger font than the accompanying "representative" text, it was, nevertheless, smaller than the larger on-screen text "nothing to repay for 60 days". We noted that one of the triggers appeared much earlier in the ad than the representative APR. We therefore considered that, in the context of the ad as a whole, the representative APR had not been given greater prominence than the other information which triggered its requirement in the ad. We concluded that the ad breached the Code.
On that point, the ad breached BCAP Code rule 14.11 14.11 The advertising of unsecured consumer credit or hire services by consumer credit businesses or consumer hire businesses and / or credit brokering businesses or related credit services, such as debt counselling or debt adjusting is acceptable only if the advertiser complies with the financial promotions requirements imposed by FSMA and the FCA's rules set out in Chapter 3 of CONC.. The requirements for financial promotions set out in Chapter 3 of CONC do not apply: (a) where the credit is available only to a company or other body corporate (such as a limited liability partnership); (b) where a financial promotion is solely promoting credit agreements or consumer hire agreements or P2P lending agreements for the purposes of a customer's business; (c) to a financial promotion to the extent that it relates to qualifying credit or (d) it falls within the definition of an excluded communication as set out in the FCA's handbook. If the applicability or interpretation of these rules or provisions is in doubt, advertisers may contact the FCA. The FCA does not check financial promotions for compliance with the CONC rules before they are published. Such advertisements that involve distance marketing must also comply with the Financial Services (Distance Marketing) Regulations 2004 (as amended). Other distance-marketing financial advertisements are covered by the FCA Handbook. (Lending and credit).
2. Not upheld
The ad included information about the procedures which AutoMoney followed when assessing loan applicants. It included claims such as "They looked at my incomings and my outgoings ..."; "And they made sure I could afford monthly repayments" and "It give us that little bit of leeway to make sure we could get that first payment together." It also stated that "loans were subject to status and affordability". We considered those claims made clear to viewers that AutoMoney had checks in place to ensure that those applying for credit could afford any repayments, regardless of why they needed a loan.
The ad explained why these particular customers had applied for a loan; a holiday, a flight from New Zealand and to buy parts for their car. While we considered that some viewers may regard these as non-essential purchases, we considered the presentation of the ad focused on the checks undertaken by AutoMoney to ensure those taking out a loan had the ability to repay the loan in an affordable way. We considered the ad did not present a casual attitude to taking out a loan because it made clear that applicants would be assessed to determine whether they could afford the repayments before being accepted. We therefore concluded the ad was not socially irresponsible.
On this point, we investigated the ad under BCAP Code rule 1.2 1.2 Advertisements must be prepared with a sense of responsibility to the audience and to society. (Social responsibility) but did not find it in breach.
Action
The ad must not be broadcast again in its current form. We told Quick Click Loans Ltd to ensure its advertising complied with the relevant consumer credit legislation.
