Online Financial Promotion – Time for Dealers to review their approach
Published: 7th May 2019
John Hughes, MD
Finance has been instrumental in helping dealers to retail cars over recent years, but dealers need to ensure they are not placing themselves at risk by breaching financial promotion regulatory requirements. This is the call to action from Mann Island Finance’s MD John Hughes following a sample assessment of dealer online advertising as he notes;
“Finance is a highly useful marketing tool but a modest sample of online adverts using finance suggests that dealers would be advised to look again at their use of finance to ensure that it conforms with the FCA requirements to be ‘clear, fair and not misleading’. This is particularly important and topical given FCA’s findings on transparency at the point of sale, reported earlier this month on the conclusion of its Motor Finance Review.”
Based upon the spot check, Hughes outlines a number of potential risk areas that may help dealers to ensure they comply with regulation:
- Representative Example: On all occasions where a rate of interest or an amount relating to the cost of credit is included, it triggers the mandatory requirement for a full Representative Example to accompany the interest rate or monthly payment. All too often in the sample assessed, the use of a monthly payment to illustrate the affordability of a used car was not accompanied by a full Representative Example or any form of ‘click through’ to a Representative Example.
- On occasion words to the effect: ‘Customise your finance’ appear next to a monthly payment; these invariably take the customer to the Representative Example. In such cases, dealers should consider including ‘Representative Example’ in this click through copy.
- Dealers can ‘cherry pick’ information such as the monthly payment within the promotional copy, but it must be no more prominent than the matching item contained within the Representative Example.
- PCP Mileage: In close proximity to any required Representative Example, it should be considered a best practice to include the annual mileage used to calculate a PCP monthly payment used in a promotion prominently. The Department of Transport figures for 2017 indicate the average annual mileage in England was 7,800 miles1. We believe that this should be considered the minimum annual mileage used in any promotional copy, other than that specifically aimed at lower-mileage customers. The inclusion of a reference to ‘plus deposit and final payment’ should also be included.
- ‘Asterisk’ confusion: if a promotion features an asterisk i.e. Buy Now Pay Later – ensure it goes to an explanation which is accessible and sufficiently prominent.
- Presenting unregulated business as regulated: particular care must be taken (and this has been the subject of a recent FCA “Dear CEO” letter2) to ensure that promotions relating (whether in part or solely) to unregulated business do not give the impression that the customer will be protected by FCA Rules or under the CCA.
Hughes concludes; “Dealers are using finance in their marketing increasingly and it is clearly working. Nevertheless, it is important for them to ensure they take every care when it comes to compliance. The points outlined do not represent an exhaustive check, but rather key points we have identified. If any dealer needs help in their finance promotion approach, I know we and I’m sure most other finance companies would be happy to do what we can to assist.”