Background
Summary of Council decision:
Four issues were investigated, all of which were Upheld.
Ad description
A TV ad for a payday loans company featured an exchange between two puppet characters who stated, "Right, we're going to explain the costs of a Wonga short-term loan", "Some people think they will pay thousands of per cent of interest", "They won't of course - that's just the way annual rates are calculated. Say you borrowed £150 for 18 days, it would cost you £33.49" and "Total cost; it's totally clear." Large on-screen text displayed throughout the ad stated "AMOUNT OF CREDIT: £150 FOR 18 DAYS. INTEREST: £27.99. INTEREST RATE: 365%PA (FIXED). TRANSMISSION FEE: £5.50. ONE TOTAL REPAYMENT OF: £183.49. REPRESENTATIVE 5853% APR". At the point that the puppet referred to the cost of the example loan, a third puppet pointed towards text stating "£33.49" that had appeared towards the top of the screen.
Issue
The ASA received 31 complaints.
1. Most complainants challenged whether the ad was misleading, because it confused as to the interest rate applied to a Wonga loan
2. Some challenged whether the ad was misleading, because it implied that the representative APR (RAPR) was irrelevant to a short-term loan.
3. Some challenged whether the ad was irresponsible, because it encouraged viewers to disregard the RAPR and thereby trivialised the decision to take out a short-term loan.
4. A few challenged whether the ad breached the Code, because the RAPR was not sufficiently prominent.
Response
1. WDFC UK Ltd, t/a Wonga said their objective with the ad had been to explain, in a transparent manner, the total "true" cost of a short-term Wonga loan. They noted that they were specifically required, under the Consumer Credit (Advertisements) Regulations 2010 ("the Regulations"), to include both the annual interest rate and the RAPR in the ad and commented that they regretted that that may have confused or misled some viewers. However, it was not in their view fair or reasonable to find that an ad which presented both pieces of information alongside each other, as stipulated in the Regulations, caused confusion as to the rate applicable.
They stated that the words "INTEREST: £27.99" in the on-screen example made clear that the RAPR could not be the applicable rate, and that they therefore considered that viewers would recognise that the relevant interest rate was "365%PA (FIXED)". They commented that, because the applicable rate was 365% PA (FIXED), the ad could only mislead if it caused viewers to think that another rate applied instead. They said it did not do that.
Wonga pointed out that the characters in the ad stated "Some people think they will pay thousands of per cent of interest. They won't of course - that's just the way annual rates are calculated", and said at that point the character pointed towards the interest rate to be applied, which was shown on screen ("365%PA (FIXED)"). They considered they had given all due prominence to both the annual rate and the RAPR, as required under the Regulations, and had at the same time explained and visually indicated that the interest rate for the loan was different to the RAPR.
Clearcast said all of the interest rates were clearly labelled and they believed that the information was particularly transparent because of the presence of on-screen text showing a worked example. They considered that the use of that example left the viewer more informed as to how the loan amount was affected by interest.
2. & 3. Wonga said they had deliberately set out to make the RAPR as clear and prominent as required by the Regulations and on that basis they considered it unreasonable to suggest that the ad underplayed the value of the RAPR. They noted that the RAPR was present on screen throughout the ad, along with other information such as the annual rate, and described its visibility and prominence as undiminished in any way. They commented that information about the RAPR could easily be taken away for comparison against other products, to the extent that viewers found that information useful. They said the ad contained only factual, accurate statements and if, after considering those statements, viewers formed the opinion that the RAPR was not the most helpful indication of the actual cost of a short-term loan, that fact reflected poorly on the RAPR as a comparative tool for those circumstances.
Clearcast noted that a previous ASA adjudication had referred to the RAPR as not necessarily being a helpful indication of the cost of short-term credit products. They stated that the ad was intended to explain more clearly how the RAPR affected a short-term loan. They believed that the ad simply explained that people taking out the advertised loan would not pay the amount listed as the RAPR, even though that RAPR was present on-screen as required by the Regulations. They said the ad then went on to clarify the actual amount to be repaid at the end of the loan period. They said the ad presented information about the RAPR that should be considered by viewers when making a decision about a short-term loan, but did not believe that the ad encouraged viewers to disregard the RAPR and therefore trivialised the decision to take out a short-term loan.
4. Wonga acknowledged that the on-screen information was not accompanied by the words "representative example", as required by the Regulations, and said they would ensure that that issue did not arise again in future. They repeated their views on the prominence of the RAPR as set out at points (2) and (3) above and stressed that the representative example was shown on the screen in large text throughout the duration of the ad. It was therefore in their opinion more prominent than the components of the ad which triggered the requirement for its inclusion.
Clearcast stated that before clearing the ad for broadcast they had received an assurance signed by Wonga's legal adviser, which stated that the ad fully complied with the Regulations and all relevant guidance thereon. They provided a copy of that assurance, which stated that the reference in the ad to a cost of credit ("£33.49") triggered the requirement to include a representative example within the ad with greater prominence than the trigger. The assurance went on to state that the RAPR was present as part of the representative example, and that that representative example had been given sufficient prominence because it was the primary focus on screen for the entire duration of the ad, whilst the trigger claim was present only towards the end of the ad (both on screen, in a smaller font size than the representative example, and in the voice-over).
Assessment
1. Upheld
The ASA understood that the ad had been intended to clarify the costs of a Wonga loan. We noted both that the on-screen text included the total amount of interest repayable on the example £150, 18-day loan (£27.99), and that the total cost of the loan (£33.49, comprised of the £27.99 interest and a £5.50 transmission fee) was communicated on screen and in the voice-over.
We considered that viewers would expect to be able to rely on the information in the ad as an exemplification of the costs of a Wonga loan generally, rather than only in relation to the specific loan cited. The ad contained various pieces of information, including the rates "365%PA (FIXED)" and "REPRESENTATIVE 5853% APR" and the amount of interest and transmission fee payable on the example loan. We acknowledged that the RAPR was not a rate of interest but a rate of charge, designed to incorporate all costs associated with a specific loan. However, we considered that the result of the voice-over stating that borrowers would not pay "thousands of per cent of interest", whilst on screen throughout, the ad identified only the RAPR for the loan as being in the thousands, was to blur the distinction between the interest rate and the RAPR and create confusion as to the interest rate that would be applied. Whilst we acknowledged that viewers taking out and repaying the loan within the stated time period would not repay 5853% of the loan, we were nevertheless concerned that viewers would be left without a clear understanding of how the information in the on-screen text could be applied to a Wonga loan, given the ad's assertion that the RAPR was not indicative of the cost of the loan.
We noted Wonga's comment that at the point that the characters stated "Some people think they will pay thousands of per cent of interest. They won't of course - that's just the way annual rates are calculated" one of them pointed towards the interest rate that would actually be applied to the loan (365% per annum, fixed). However, we considered that it was not clear that the character was specifically pointing towards one part of the on-screen text, rather than simply gesturing in the direction of all of the information.
For the reasons outlined above, we considered that, though it attempted to clarify the costs associated with a Wonga loan, the ad created confusion as to the rates that would apply. On that basis, we concluded that the ad was misleading.
On that point, the ad breached BCAP Code rules
3.1
3.1
Advertisements must not materially mislead or be likely to do so.
and
3.2
3.2
Advertisements must not mislead consumers by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that consumers need in context to make informed decisions about whether or how to buy a product or service. Whether the omission or presentation of material information is likely to mislead consumers depends on the context, the medium and, if the medium of the advertisement is constrained by time or space, the measures that the advertiser takes to make that information available to consumers by other means.
(Misleading advertising).
2. & 3. Upheld
The ad included, as required by the Regulations, standard information (including the RAPR) in the form of a representative example for the loan. We acknowledged that that information was displayed in on-screen text present throughout the ad. However, we noted that the voice-over purported to "… explain the costs of a Wonga short-term loan" and stated that borrowers would not pay "… thousands of per cent of interest", commenting "… that's just the way annual rates are calculated". We considered that viewers would be likely to associate the reference to "thousands of per cent of interest" with the listed RAPR, both because it was shown as being over 5000% and because they would be more generally aware that RAPRs for short-term credit products were often in the thousands of per cent. We considered that the effect of the voice-over, and in particular the statement "… that's just the way annual rates are calculated", was to imply to viewers that the RAPR was a measure that need not be factored into their considerations as to whether or not to take out a short-term loan of the type advertised.
We understood that the RAPR was calculated on an annual basis and took into account charges for the credit relative to the amount borrowed. As short-term loans were designed to be repaid over a much shorter period and because the charges for such products were generally higher in comparison to the loan amount than with other forms of borrowing, the resultant RAPR was usually high. We acknowledged that the RAPR was therefore not necessarily the most helpful indication of the actual cost of a short-term loan if it was repaid on the agreed date. However, we noted that the RAPR was a standard measure which enabled comparison between credit products, specifically because it assumed a set loan period and accounted for the charges associated with the loan. We therefore considered that the RAPR was of relevance to those contemplating taking out a loan, whether short-term or otherwise, and that discouraging borrowers from taking full account of its significance was irresponsible.
Because we considered that the ad misled as to the relevance of the RAPR to a short-term loan, and because we considered it irresponsibly encouraged viewers to disregard the RAPR, we concluded that it breached the Code.
On those points, the ad breached BCAP Code rules
1.2
1.2
Advertisements must be prepared with a sense of responsibility to the audience and to society.
(Responsible advertising) and
3.1
3.1
Advertisements must not materially mislead or be likely to do so.
and
3.2
3.2
Advertisements must not mislead consumers by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that consumers need in context to make informed decisions about whether or how to buy a product or service. Whether the omission or presentation of material information is likely to mislead consumers depends on the context, the medium and, if the medium of the advertisement is constrained by time or space, the measures that the advertiser takes to make that information available to consumers by other means.
(Misleading advertising).
4. Upheld
According to the Regulations, credit ads which included a rate of interest or amount relating to the cost of the credit should also include standard information (including the RAPR) by means of a representative example, and that representative example should be of greater prominence than the trigger. We noted that an amount relating to the total cost of the credit (£33.49) was presented both on screen and in the voice-over and therefore triggered the requirement for the inclusion of the representative example with greater prominence.
Where a representative example was given in an ad, it was necessary under the Regulations to present each element of that example together, with equal prominence, and to accompany the information with the words "representative example". We noted that the ad contained a representative example, but did not accompany it with that description, which was a breach of the Regulations.
The trigger relating to the total cost of the credit was included both in the voice-over ("... it would cost you £33.49") and in on-screen text which dropped from the top of the screen during the ad, but the triggered information (the representative example) featured in on-screen text only. The representative example was included in large text in the centre of the screen, and together with the puppet characters formed the only visual detail of the ad. However, although we acknowledged that it was therefore reasonably prominent within the overall presentation of the ad, we did not agree that it was more prominent than the triggering information, in particular because the on-screen trigger "£33.49" appeared on screen in a dynamic way during the ad and was then highlighted by the actions of a puppet character who had climbed over the representative example to gesticulate towards the trigger with a pointer. We considered that that presentation, combined with the accompanying voice-over claim, "... it would cost you £33.49", was likely to draw the viewer's attention more than the representative example, and that the representative example (which included the RAPR) was therefore insufficiently prominent in respect of the statements of the total cost of the credit.
We further noted that the on-screen text included the words "INTEREST: £27.99". Although this was presented together with the representative example, it was not in fact specified by the Regulations as part of the standard information that should be included within a representative example. It was therefore, as an amount relating to the cost of the credit, itself a trigger requiring the inclusion in the ad of the representative example with greater prominence. Because the two were included on screen together and in the same size text, we concluded the representative example was insufficiently prominent in respect of the text "INTEREST: £27.99".
For the reasons outlined above, we considered that the representative example, including the RAPR, was not sufficiently prominent in the ad and therefore 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).
Action
The ad must not appear again in its current form.
