Consumer credit adverts are misleading borrowers

The financial services regulator has warned lenders and brokers to stop using misleading terms in advertisements or face regulatory action.

The Financial Conduct Authority (FCA) has warned that the cost of living crisis is causing more people to borrow money.

When borrowing, marketing that fails to provide clear information and warnings about the potential consequences of borrowing money can place consumers at risk of being in an even worse financial position.

The FCA has written to around 28,000 consumer credit firms with the warning not to use terms including “no credit check loans”, “loan guaranteed”, “pre-approved”, or “no credit checks” in their marketing materials.

Adverts from consumer credit firms should not give consumers the false impression that they can borrow money without the lender first checking if the loan is affordable.

After issuing the warning letter, the FCA will continue monitoring online advertising in the consumer credit sector to check lenders are complying with the rules.

Where consumer credit firms fail to comply, the FCA will ban adverts or require the firms to alter or withdraw them.

The FCA could even withdraw permissions for firms to engage in regulated credit activity.

Following the warning, two consumer credit firms have already agreed with the FCA that they will change their financial promotions, including removing phrases like “no credit check loans”.

This regulatory warning is part of a broader FCA plan to protect and support the users of consumer credit markets, with a three-year strategy designed to drive up standards and make firms put consumers’ needs first.

Sheldon Mills, Executive Director of Consumers and Competition at the FCA, 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.”