Background
The ASA received a total of 82 complaints about Wonga.com ads that did not state an Annual Percentage Rate of interest (APR). 3 of those complaints related to the ad which we investigated, while 79 other complaints did not specifically identify the Wonga.com ads which they related to.
Ad description
A TV ad for a short-term loan company featured three puppets that were portrayed as elderly employees in an office. Two of the puppets addressed the camera and made statements including "We make decisions instantly", "Money could be in your account in 15 minutes" and "We're fast here" while the third typed quickly on a keyboard in the background. At one point, a mug was knocked off a desk and one of the puppets was shown reaching out and catching it in slow motion. Text at the bottom of the screen stated "18+.Subject to status.T&Cs apply".
Issue
Three viewers challenged whether the ad was misleading because it did not state an Annual Percentage Rate of interest (APR).
Response
Wonga.com Ltd stated that they had developed a transparent method for detailing the true cost of borrowing on their website and they pointed out that the type of loans that were the subject of the ad could only be applied for on their website or via the corresponding mobile application. They stated that, as with all financial products, comprehensive terms and conditions were in place and customers were required to read those as a whole before entering into a contract with them. They believed they had given elevated status to the phrase "terms and conditions apply" in the ad and had not attempted to include selected information that viewers were unlikely to read or have time to process.
Wonga.com stated that they offered short-term loans of up to one month's duration. They stated that the APR was a "one-size-fits-all" piece of comparative information intended to allow a meaningful cost comparison between long-term products, such as personal loans, mortgages and credit cards. They believed that the inclusion of an APR alone would not allow customers to make a meaningful comparison between the true cost of a short-term loan from Wonga.com and the true cost of another financial product, which could have very different terms, including duration. They stated that the ad was not intended to draw a direct comparison with another product and that they believed directing customers to the actual cost of borrowing and additional information on their website was the best way of ensuring they made informed decisions. They stated that their July 2011 customer satisfaction survey revealed 95% of the 20,000 customers surveyed agreed Wonga had provided them with sufficient information whilst using their service and that this information was conveyed "well" or "very well".
Wonga.com stated that they had looked carefully at the content of their ad before broadcast and were satisfied that they had met their obligations in terms of the Consumer Credit (Advertisements) Regulations 2010 (the CCARs). They considered that the ad went no further than to describe the product in broad terms, providing detail of some elements of customer service that supported the product. They said the ad did not promote special terms or individual aspects of the product and instead focused on brand awareness.
Clearcast stated that after careful deliberation they considered the ad had focused on various features of Wonga's functionality and had not directly promoted their loans. They therefore considered that the only material conditions that were necessary in addition to a statement that "terms and conditions apply" were those that may have restricted consumers' access to a loan, specifically age and status. Clearcast believed that it would be common knowledge that a loan provider would lend money to individuals at a certain APR and that it had not been necessary to state an APR on this occasion because no specific cash amounts were mentioned.
Clearcast stated that they had been concerned that an advertisement for a product of this nature would be required by law to state an APR. They explained that they had therefore obtained assurances from Wonga's General Counsel that set out the reasons why they were firmly of the view that the advert was fully compliant with the CCARs.
Assessment
Not upheld
The ASA noted that Wonga believed the ad went no further than to describe the product in broad terms. We considered that the predominant message viewers would take from the ad was that they could obtain a loan extremely quickly by visiting the Wonga website. We considered that the claims "We make decisions instantly", "Money could be in your account in 15 minutes" and "We're fast here" made the 'speed' point explicitly and we considered that the visual message, while clearly intended to be light-hearted, reinforced that message by showing one of the characters typing rapidly and reacting quickly to catch the falling mug. We noted that the ad started and finished with a reference to "Wonga.com" and that during the ad one of the characters stated that the process was "all done online", before another gave an opinion on the potential inconvenience of applying for credit by telephone. We considered that those statements and the on-screen text that read "T&Cs apply" made clear to viewers that they would have to visit the Wonga website for more information and to apply for credit.
We noted that the website to which viewers were directed also carried prominent references to the speed with which a loan could be obtained. However, although we noted that the APR was high (listed on the Wonga website at the time of the advertising as 4,214%), as was the actual interest rate, we noted that this information was provided clearly on the website, which also included a mechanism that allowed consumers to calculate the true cost of borrowing. We noted that the customer satisfaction survey only included the views of those who had chosen to use Wonga's services having visited the website and related to the period before the ad was broadcast, but we noted that the vast majority of participants had agreed that information was communicated well when using Wonga's service.
We considered first whether the APR should have been quoted by virtue of regulation 6(1)(b) of the CCARs, which said an ad must state the representative APR if it included an incentive to apply for credit. The Term "incentive" was not defined. Guidance from the Office of Fair Trading ("the OFT") on the predecessor legislation said that references to the speed at which loans could be obtained might be an incentive that triggered the requirement for the inclusion of a representative APR. However, the OFT also drew our attention to the recent decision of the First-tier Tribunal (Consumer Credit) in Log Book Loans v OFT in which the Tribunal had concluded that, whilst "incentive" was likely to cover the offer of a special gift or holiday or stated discount, ads which referred for example to "fast loans" as part of a general description of the basic product offered did not constitute an incentive to apply for credit. Although the decision of the Tribunal was not binding on us, we thought it helpful and noted that the OFT was still considering its position (with regards to the extent that references to 'speed' might constitute an 'incentive' for the purposes of the CCARs) in light of the Tribunal decision. We concluded that the various statements relating to speed throughout the ad constituted a description of the inherent features of the service on offer rather than an incentive to apply for credit within the meaning of regulation 6(1)(b) of the CCARs (such as might be the case with, say, some categories of case being dealt with more speedily).
We then considered whether the ad was misleading by omission in failing to state a representative APR, given the high rate of interest charged and potential vulnerability of those seeking a rapid short-term loan. We considered that the emphasis on speed in the ad could encourage some viewers to spend little or no time considering the possible alternative sources of funding. We noted that the "Review of high cost credit" produced by the OFT in 2010 included survey evidence suggesting that speed was indeed an important factor for those seeking short-term high cost credit. However, the same evidence also suggested that some 80% of payday borrowers had other credit options available (even if they might not consider them) and would ordinarily be in employment and not among the most vulnerable sections of society. We noted that the representative APR, which the CCARs required to be quoted in certain circumstances, was not necessarily a helpful indication of the cost of short-term credit products. The ad did not include specific information on the terms upon which credit was available and instead directed viewers to the website where all information regarding the cost of borrowing was clearly presented. Although we considered it would be desirable for ads for short-term high cost credit products to alert viewers clearly to what was on offer (e.g. by stating "X is a high interest, short-term loan provider"), we concluded that the ad was unlikely to mislead viewers by omission of material information concerning the rate of interest.
We investigated the ad under BCAP Code rules
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) and
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.
(Financial products), but did not find it in breach.
Action
No further action required.
