CONC 3.5 Financial promotions about credit agreements not secured on land
Application
This section applies:
- (1)
to a financial promotion in relation to consumer credit lending;
- (2)
to a financial promotion in relation to credit broking in relation to regulated credit agreements;
- (3)
to a financial promotion in relation to activities specified in article 36A(1)(a) or (c) of the Regulated Activities Order in relation to what would be regulated credit agreements but for a relevant provision, but only where the firm also carries on such activities in relation to regulated credit agreements;
and in each case, other than to financial promotions to the extent that they relate to agreements secured on land.
Prohibition on financial promotion where goods etc. not sold for cash
A financial promotion must not be communicated where it indicates a firm is willing to provide credit under a regulated restricted-use credit agreement relating to goods or services to be supplied by any person, when at the time the financial promotion is communicated, the firm or any supplier under such an agreement does not hold itself out as prepared to sell the goodsor provide the services (as the case may be) for cash.
[Note: section 45 of CCA]
Content of financial promotions
- (1)
Where a financial promotion includes a rate of interest or an amount relating to the cost of credit whether expressed as a sum of money or a proportion of a specified amount, the financial promotion must also:
- (a)
include a representative example in accordance with CONC 3.5.5 R, and
- (b)
specify a postal address at which the person making the financial promotion may be contacted.
[Note: regulation 4(1) of CCAR 2010]
- (a)
- (2)
Paragraph (1)(a) does not apply where the financial promotion:
- (a)
falls within CONC 3.5.7 R; and
- (b)
does not indicate a rate of interest or an amount relating to the cost of credit other than the representative APR.
[Note: regulation 4(2) of CCAR 2010]
- (a)
- (3)
Paragraph (1)(b) does not apply to financial promotions:
- (a)
communicated by means of television or radio broadcast; or
- (b)
in any form on the premises of a dealer or lender, other than financial promotions in writing which customers are intended to take away; or
- (c)
which include the name and address of a dealer; or
- (d)
which include the name and postal address of a credit broker.
[Note: regulation 4(1)b of CCAR 2010]
- (a)
Guidance on showing interest rates and cost of credit
A rate of interest for the purpose of CONC 3.5.3R (1) is not limited to an annual rate of interest but would include a monthly or daily rate or an APR. It would also include reference to 0% credit. An amount relating to the cost of credit would include the amount of any fee or charge, or any repayment of credit (where it includes interest or other charges).
[Note: paragraph 6.7 of BIS Guidance on regulations implementing the Consumer Credit Directive]
Representative example
- (1)
The representative example in CONC 3.5.3R (1) must comprise the following items of information:
- (a)
the rate of interest, and whether it is fixed or variable or both, expressed as a fixed or variable percentage applied on an annual basis to the amount of credit drawn down;
- (b)
the nature and amount of any other charge included in the total charge for credit;
- (c)
- (d)
the representative APR;
- (e)
in the case of credit in the form of a deferred payment for specific goods, services, land or other things, the cash price and the amount of any advance payment;
- (f)
the duration of the agreement;
- (g)
the total amount payable; and
- (h)
[Note: regulation 5(1) of CCAR 2010]
[Note: article 4 of the Consumer Credit Directive]
- (a)
- (2)
The items of information required by (1)(a), (b), (c), (e), (f) and (g) must be those which the firm communicating or approving the financial promotion reasonably expects at the date on which the financial promotion is made to be representative of credit agreements to which the representative APR applies and which are expected to be entered into as a result of the promotion.
[Note: regulation 5(2) of CCAR 2010]
- (3)
For (1)(e), the reference in (2) to “credit agreements to which the representative APR applies” is to agreements providing credit for the purchase of specific goods, services, land or other things, to which the representative APR applies.
[Note: regulation 5(3) of CCAR 2010]
- (4)
For the purposes of (1)(a), where the credit agreement provides for different ways of drawdown with different rates of interest, the rate of interest shall be assumed to be the highest rate applied to the most common drawdown mechanism for the product to which the agreement relates.
[Note: regulation 5(4) of CCAR 2010]
- (5)
The information required by (1) must be:
- (a)
specified in a clear and concise way;
- (b)
accompanied by the words “representative example”;
- (c)
presented together with each item of information being given equal prominence; and
- (d)
given greater prominence than:
- (i)
any other information relating to the cost of credit in the financial promotion, except for any statement relating to an obligation to enter into a contract for an ancillary service referred to in CONC 3.5.10 R; and
- (ii)
any indication or incentive of a kind referred to in CONC 3.5.7 R.
- (i)
[Note: regulation 5(6) of CCAR 2010]
- (a)
- (6)
A financial promotion for a credit agreement with no fixed duration is not required to include the duration of the agreement or the total amount payable or the amount of each repayment of credit.
[Note: regulation 5(1)f of CCAR 2010]
- (7)
A financial promotion for an authorised non-business overdraft agreement is not required to include a representative APR.
[Note: regulation 5(5) of CCAR 2010]
Guidance on the representative example
- (1)
The representative example in CONC 3.5.5 R should not be limited to being representative of agreements featured in the financial promotion if the firm communicating or approving the financial promotion expects other agreements to be entered into as a result of the financial promotion, whether with the firm or with a third party.
[Note: paragraph 6.8 of BIS Guidance on regulations implementing the Consumer Credit Directive]
- (2)
Where the agreement provides for compounding, the rate of interest in CONC 3.5.5R (1) should generally be the effective annual interest rate and lenders should use the same assumptions to calculate this interest rate as they do for the APR; the assumptions set out in CONC App 1.2. If a firm uses a different rate to calculate the rate of interest in CONC 3.5.5R (1) it must clearly explain this to the customer, so that the customer is clear whether and to what extent the rate used is comparable with rates shown by other lenders.
[Note: paragraph 6.13 of BIS Guidance on regulations implementing the Consumer Credit Directive]
- (3)
If a rate of interest or a charge applies for only a limited period, the duration of the period and the rate or amount following that period, if known or ascertainable, should be shown.
[Note: paragraph 6.13 of BIS Guidance on regulations implementing the Consumer Credit Directive]
- (4)
For charges other than interest which are included in the total charge for credit, the financial promotion should in each case make clear the nature of the charge and the amount of the charge if ascertainable or a reasonable estimate of the charge, making clear in that case it is an estimate.
[Note: paragraph 6.13 of BIS Guidance on regulations implementing the Consumer Credit Directive]
- (5)
The total amount of credit equates to the sum available to the customer to use and does not include charges which are financed by the credit agreement; those are part of the total charge for credit.
- (6)
For showing the cash price, the total cash price of all items should be shown, together with the price of each item individually.
Other financial promotions requiring a representative APR
- (1)
A financial promotion must include the representative APR if it:
- (a)
indicates in any way, whether expressly or by implication,2 including by means of the name given to the business or the product or of an address used by a business for the purposes of electronic communication, that:
- (i)
credit is available to persons who might otherwise consider their access to credit restricted; or
- (ii)
any of the terms on which credit is available is more favourable (either for a limited period or generally) than corresponding terms applied in any other case or by any other lender;2 or
2 - (iii)
the way in which the credit is offered is more favourable (either for a limited period or generally) than corresponding ways used in any other case or by any otherlender;2 or
2
[Note: regulation 6 of CCAR 2010]
- (i)
- (b)
includes an incentive (including but not limited to gifts, special offers, discounts and rewards) to apply for credit or to enter into an agreement under which credit is provided;
- (c)
includes an incentive (in the form of a statement about the speed or ease of processing, considering or granting an application, or of making funds available) to apply for credit or to enter into an agreement under which credit is provided.
- (a)
- (2)
The representative APR must be given greater prominence than any indication or incentive in (1).
- (3)
This rule does not apply to a financial promotion for an authorised non-business overdraft agreement.
Whether or not a reference to speed or ease in CONC 3.5.7R (1)(c) constitutes an incentive to apply for credit or enter into an agreement under which credit is provided would depend upon the circumstances, including whether it is likely to persuade or influence a customer to take those steps or is merely a factual statement about the product or service.
Annual percentage rate of charge
In a financial promotion:
- (1)
an APR must be shown as “%APR”;
- (2)
where an APR is subject to change it must be accompanied by the word “variable”; and
- (3)
the representative APR must be accompanied by the word “representative”.
[Note: regulation 7 of CCAR 2010]
Ancillary services
- (1)
A financial promotion must include a clear and concise statement in respect of any obligation to enter into a contract for an ancillary service where:
- (a)
the conclusion of that contract is compulsory in order to obtain the credit or to obtain it on the terms and conditions promoted; and
- (b)
the cost of that ancillary service cannot be determined in advance.
[Note: regulation 8 of CCAR 2010]
- (a)
- (2)
The statement in (1) must:
- (a)
be no less prominent than any information in CONC 3.5.5R (1) included in the financial promotion; and
- (b)
be presented together with any representative APR included in the financial promotion.
- (a)
- (3)
This rule does not apply to a financial promotion for an authorised non-business overdraft agreement.
Security
Restricted expressions
- (1)
A financial promotion must not include:
- (a)
the word “overdraft” or any similar expression as describing any agreement for running-account credit, except where an agreement enables a customer to overdraw on a current account;
- (b)
the expression “interest free” or any similar expression indicating that a customer is liable to pay no greater amount in respect of a transaction financed by credit than he would be liable to pay as a cash purchaser for the like transaction, except where the total amount payable does not exceed the cash price;
- (c)
the expression “no deposit” or any similar expression, except where no advance payments are to be made;
- (d)
the expression “loan guaranteed”, “pre-approved” or “no credit checks” or any similar expression, except where the agreement is free of any conditions regarding the credit status of the customer; or
- (e)
the expression “gift”, “present” or any similar expression, except where there are no conditions which would require the customer to repay the credit or to return the item that is the subject of the claim.
[Note: regulation 10 of CCAR 2010]
- (a)
- (2)
A financial promotion must not include for a repayment of credit the expression “weekly equivalent” or any expression to like effect or any expression of any other periodical equivalent, unless weekly repayments or the other periodical payments are provided for under the agreement.
- (3)
In this rule, “cash purchaser” means a person1 who, for money consideration, acquires goods, land or other things or is provided with services under a transaction which is not financed by credit.
1
Total charge for credit and APR
- (1)
Where a financial promotion is about running-account credit and the credit limit applicable is not yet known on the date the financial promotion is made, but it is known that it will be less than £1,200, the credit limit must be assumed to be an amount equal to that maximum limit.
[Note: paragraph 1 of schedule to CCAR 2010]
- (2)
The assumption in (1) applies in place of the assumption in CONC App 1.2.5 R for the purpose of calculating the total charge for credit.
Total charge for credit and APR: tolerances for APR
- (3)
For a financial promotion, it is sufficient to show an APR if there is included in the promotion:
- (a)
a rate which exceeds the APR by not more than one; or
- (b)
a rate which falls short of the APR by not more than 0.1; or
- (c)
where applicable, a rate determined in accordance with (4) or (5).
[Note: paragraph 2 of schedule to CCAR 2010]
- (a)
Total charge for credit and APR: tolerance where repayments are nearly equal
- (4)
Where an agreement under which all repayments but one are equal and that one repayment does not differ from any other repayment by more whole pence than there are repayments of credit, there may be included in a financial promotion about the agreement a rate found under CONC App 1.2.4 R as if that one repayment were equal to the other repayments to be made under the agreement.
[Note: paragraph 3 of schedule to CCAR 2010]
Total charge for credit and APR: tolerance regarding interval between relevant date and first repayment
- (5)
Where a credit agreement provides that:
- (a)
three or more repayments are to be made at equal intervals; and
- (b)
the interval between the relevant date and the first repayment is greater than the interval between the repayments;
a financial promotion about the agreement may include a rate found under CONC App 1.2.4 R as if the interval between the relevant date and the first repayment were shortened so as to be equal to the interval between the repayments.
[Note: paragraph 4 of schedule to CCAR 2010]
- (a)
- (6)
The relevant date in (5) is:
- (a)
where a date on which the customer is entitled to require provision of the subject of a credit agreement is specified in or can be determined from the agreement, the earliest such date;
- (b)
in any other case, the date of making the agreement.
- (a)