I wrote a legal update back in December 2021 about Financial Promotions, specifically representative APRs, a link to the article is below:
The reason I have returned to this legal update is two-fold:
- The Financial Conduct Authority (FCA) released their Guidance consultation Financial promotions on social media (GC23/2) last month.
- The introduction of the Consumer Duty will mean that the FCA will have higher expectations as to how firms communicate with their customers.
Another Bank of England interest rate rise today (03/08/2023) to 5.25% means it is all the more important that your financial promotions are up to date and the correct representatives APRs are being shown. At the time of writing my previous legal update back in December 2021, the interest rate was 0.25%!
The reason for the FCA’s consultation is because “social media has become an increasingly vital part of firms’ marketing strategies, allowing them to reach a mass audience at increasing speed and frequency. While this has helped firms communicate with consumers more effectively, poor quality financial promotions on social media can lead to significant consumer harm due to their wide reach and the complex nature of financial services.”
The last FCA guidance FG15/4: social media and customer communications – the FCA’s supervisory approach to financial promotions in social media was issued in 2015. Whilst it is still relevant today, it was heavily based around character-limited media such as Twitter and makes no reference to use of influencers communicating financial promotions.
The FCA has “observed the rise of ‘finfluencers’ with 62% of 18 to 29-year-olds following social media influencers and 74% saying they trust their advice. As a result, 9 in 10 young followers have been encouraged to change their financial behaviour. This has been coupled with a substantial rise in influencers being used by firms to promote financial products and services. Often these influencers have little knowledge of what they’re promoting. This lack of expertise is reflected in the large number of promotions that are either illegal or non-compliant, making it likely that consumers will see poor quality information on social media.”
The FCA stated in FG15/4, “We remind firms that any form of communication (including through social media) is capable of being a financial promotion, depending on whether it includes an invitation or inducement to engage in financial activity.”
The FCA will welcome views and comments on their consultation until September and will then finalise their guidance by the end of 2023.
We suggest you review the consultation and the previous guidance back in 2015 to ensure that you fully understand their requirements. If you are unsure, we suggest that you speak to your principal lender as it is their products that you are promoting.
Octane Finance is the broker of choice for new and used car dealers nationwide. With our uncompromising service levels and our genuine and professional approach, you and your customers can trust us to deliver.
