Finance companies warned over advertising 'easy credit'

Finance firms have been warned they face regulatory action if they exploit the cost of living crisis to promote consumer loans in their advertising following a spate of “easy credit” ads.

The Financial Conduct Authority has issued the ultimatum after saying it had witnessed a number of financial promotions that included phrases such as “no credit checks” and “loan guaranteed”.

The move comes as one Decision Marketing reader has contacted us to say she has just received a direct mailshot from her bank, HSBC, offering her a loan, even though she is currently between jobs.

The FCA has written to nearly 28,000 consumer credit firms to warn them that marketing which does not give clear information about the potential consequences of borrowing puts consumers at risk of finding themselves in a worse financial position.

Ads must not give consumers the impression that they will automatically get a loan if they apply, or that they can get a loan without the lender checking they can afford it, the regulator said.

The letter states: “Millions of people are facing the biggest cost of living crisis in more than a decade with bills expected to rise considerably.

“We can expect to see greater demand for credit, including short-term credit, particularly impacting consumers in vulnerable circumstances. We need to keep the sector under close review to ensure that demand does not result in unsustainable and often unaffordable lending.

“Firms have a responsibility to ensure they do not exploit the cost-of-living crisis to promote their services.Firms should focus on their customers’ needs, delivering the right information, at the right time, and in accordance with our rules.”

The FCA said it will continue to monitor online credit advertising to check firms are complying.

FCA action could include banning ads or forcing companies to change or withdraw them – or even removing a firm’s permissions to engage in regulated credit activity.

FCA executive director of consumers and competition Sheldon Mills said: “The rising cost of living means many more consumers may find themselves in difficulty.

“When people are looking for a loan, it’s vital that they have the full picture about what this might mean and the risks involved – particularly if they are already in a difficult financial situation.

“There is no excuse for adverts to make borrowing look easier or less risky than it is and they should be seeking to help customers through the cost of living crisis – not exploiting it in their marketing.”

Which? director of policy and advocacy Rocio Concha said: “The FCA should not hesitate to take action if firms fail to heed these warnings and continue to exploit the cost-of-living crisis to promote their products.”