CONC 3.5 Financial promotions about credit agreements not secured on land

Application

CONC 3.5.1R01/04/2014

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

CONC 3.5.2R01/04/2014

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

CONC 3.5.3R31/05/2016

(1)
Where a financial promotion indicates3 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:
1. (a)
  include a representative example in accordance with CONC 3.5.5 R, and
2. (b)
  specify a postal address at which the person making the financial promotion may be contacted.
[Note: regulation 4(1) of CCAR 2010]
(2)
Paragraph (1)(a) does not apply where the financial promotion:
1. (a)
  falls within CONC 3.5.7 R; and
2. (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]
(2A)
Paragraph (1)(a) also does not apply where the financial promotion relates only to credit agreements in respect of which the APR is 0%.4
(3)
Paragraph (1)(b) does not apply to financial promotions:
1. (a)
  communicated by means of television or radio broadcast; or
2. (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
3. (c)
  which include the name and address of a dealer; or
4. (d)
  which include the name and postal address of a credit broker.
[Note: regulation 4(1)b of CCAR 2010]

Guidance on showing interest rates and cost of credit

CONC 3.5.4G31/05/2016

(1)
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 (but where the APR is 0% and CONC 3.5.3R(2A) applies, a representative example is not required)4. 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).3

[Note: paragraph 6.7 of BIS Guidance on regulations implementing the Consumer Credit Directive]

(2)
If a rule in CONC 3.5 applies to a rate of interest or a charge, and the rate or 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.3

[Note: paragraph 6.13 of BIS Guidance on regulations implementing the Consumer Credit Directive]3

Representative example

CONC 3.5.5R06/04/2020

(1)
The representative example in CONC 3.5.3R (1) must comprise the following items of information:
1. (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;
2. (b)
  the nature and amount of any other charge included in the total charge for credit;
3. (c)
  the total amount of credit;
4. (d)
  the representative APR;
5. (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;
6. (f)
  the duration of the agreement;
7. (g)
  the total amount payable; and
8. (h)
  the amount of each repayment of credit.
[Note: regulation 5(1) of CCAR 2010]
[Note: article 4 of the Consumer Credit Directive]
(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:
1. (a)
  specified in a clear,3 concise and prominent3 way;
2. (b)
  accompanied by the words “representative example”;
3. (c)
  presented together with each item of information being given equal prominence; and
4. (d)
  given no less3 prominence than:
  1. (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
  2. (ii)
    any indication or incentive of a kind referred to in CONC 3.5.7 R.
[Note: regulation 5(6) of CCAR 2010]
(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 provided by a firm of a type listed in CONC 5C.1.2R(2)7 is not required to include a representative APR.
[Note: regulation 5(5) of CCAR 2010]

Guidance on the representative example

CONC 3.5.6G06/04/2020

(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]
(1A)
Firms are referred to the Glossary definition of representative APR and reminded that they should consider the agreements which they reasonably expect to be entered into (whether by the firm or by another person) as a result of the financial promotion, and ensure that the 51% test in that definition takes account of the APR of each of those agreements. The representative example in CONC 3.5.5R should be representative of agreements to which the representative APR applies.3
(1B)
The example referred to in (1) is unlikely to be representative if, for example, most customers entering into agreements as a result of the financial promotion are likely to do so for a lower amount of credit than that indicated in the example, or with higher rates of interest or other charges than those indicated in the example.3
(1C)
1. (a)
  The guidance in this provision is relevant to the calculation of an APR for an authorised non-business overdraft agreement which is a necessary first step when calculating the representative APR in a financial promotion for the authorised non-business overdraft agreement. It is, therefore, also relevant to the calculation of the representative APR in a financial promotion for an authorised non-business overdraft agreement. 7
2. (b)
  This guidance relates to a situation where the terms and conditions that apply to an authorised non-business overdraft agreement provide that no interest or other charges are payable in relation to a drawing (authorised in advance) up to a specified amount (including in circumstances where the drawdown exceeds the specified amount). This is sometimes referred to as a “fee-free amount”. 7
3. (c)
  Firms are reminded that CONC 5C.2.1R(7) prohibits certain types of fee-free amounts in relation to overdrafts where the benefit of the fee-free amount is liable to be lost in certain circumstances.7
4. (d)
  1. (i)
    For the purposes of calculating the total charge for credit and the APR, CONC App 1.2.5R (Assumptions for calculation) sets out various assumptions. A number of these assumptions apply “where necessary” to deal in a consistent and comparable way with factors that are not certain at the time the total charge for credit or APR is calculated.7
  2. (ii)
    Where, however, the terms of a permissible fee-free amount that apply to an authorised non-business overdraft agreement are known at the time the APR is calculated (and the incidence of the benefit of the fee-free amount is certain if the overdraft is used), the APR calculation should reflect those terms. In that situation, it is unlikely to be necessary to make the assumption that the fee-free amount does not exist under CONC App 1.2.5R. 7
(1D)
1. (a)
  1. (i)
    This guidance is relevant to whether to include account fees in the calculation of the APR for an authorised non-business overdraft agreement. The type of account fee this guidance is intended to address is a periodic charge a customer is required to pay in order to obtain and maintain access to a personal current account that has an overdraft facility.7
  2. (ii)
    CONC App 1.2.3R (Total charge for credit) provides that the costs of maintaining an account recording both payment transactions and drawdowns are included in the total cost of credit to the borrower. There is an exception to this rule (see CONC App 1.2.3R(3)) where: “(a) the opening of the account is optional and the costs of the account have been clearly and separately shown in the regulated credit agreement or in any other agreement with the borrower; (b) in the case of an overdraft facility the costs do not relate to that facility.”7
  3. (iii)
    Whether an account fee is required to be included in the calculation of an APR depends on whether the credit under the associated authorised non-business overdraft agreement can be obtained on the same terms without incurring the account fee. If an authorised non-business overdraft agreement is not available on the same equally favourable terms without the imposition of the fee, that fee is likely to be considered to “relate” to the overdraft facility.7
2. (b)
  The following are examples of situations where it is likely that an account fee should be included in the calculation of the total charge for credit and the APR for an authorised non-business overdraft agreement.7
  1. (i)
    A personal current account that is subject to an account fee, one of the features of which is an arranged overdraft facility with more favourable terms (for example, a lower interest rate) than those offered on accounts that do not require the payment of an account fee.7
  2. (ii)
    A firm that offers personal current accounts with associated arranged overdraft facilities in respect of all of which there is an account fee.7
3. (c)
  A firm may offer a “packaged bank account” that is a composite product with a number of constituent elements, one of which is an overdraft facility, but others of which are different services. If there is a fee for an optional non-overdraft element of the package that the customer can avoid by choosing not to have that element of the package, and the customer can still have the overdraft element of the package on the same terms, that avoidable fee should not be included in the APR calculation. 7
(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)
[deleted]3
(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. For the purposes of the Glossary definition of cash price in this context, a discount will be treated as generally available if most customers paying in cash are likely to be, or would reasonably expect to be, offered or given the discount.3
(7)
Other than in the case of an authorised non-business overdraft agreement provided by a firm of a type listed in CONC 5C.1.2R(2), where a financial promotion for an authorised non-business overdraft agreement is required to include a representative example, one of the items that must be included in the example is the representative APR.7

Other financial promotions requiring a representative APR

CONC 3.5.7R06/04/2020

(1)
A financial promotion must include the representative APR if it:
1. (a)
  states or implies that credit is available to individuals who might otherwise consider their access to credit restricted; or3
  2 3
2. (b)
  includes a favourable comparison relating to the credit, whether express or implied, with another person, product or service; or3
3. (c)
  includes an incentive 3to apply for credit or to enter into an agreement under which credit is provided.
[Note: regulation 6 of CCAR 2010]3
(1A)
A financial promotion which states that a cash sum is available for opening an account, other than a current account mortgage, which is a payment account within the meaning of the Payment Accounts Regulations and which does not refer to the availability of credit under an authorised non-business overdraft agreement in connection with that account must not be regarded as including an incentive to apply for credit or to enter into an agreement under which credit is provided for the purposes of (1)(c). 7
(2)
The representative APR must be given no less3 prominence than any of the matters3 in (1).
(3)
This rule does not apply to a financial promotion:4
1. (a)
  for an authorised non-business overdraft agreement provided by a firm of a type listed in CONC 5C.1.2R(2)7; or
  4
2. (b)
  for a credit agreement in respect of which the APR is 0%; or4
3. (c)
  for a credit agreement to be entered into by a community finance organisation as lender.4

CONC 3.5.8G06/04/2020

(1)
A firm’s trading name, website address or logo could trigger the requirements in CONC 3.5.7R(1).3
(2)
For the purposes of CONC 3.5.7R(1)(b), a comparison with another person, product or service includes a reference (whether stated or implied) to:3
1. (a)
  the terms on which, or the way in which, credit is offered or made available; or3
2. (b)
  the nature or quality or any other aspect of the service relating to the credit that the person offers or provides (or does not offer or provide).3
The financial promotion does not need to specify a particular person, product or service for there to be a comparison.3
(3)
A financial promotion does not necessarily include a comparison where it merely refers to a person, product or service in a factual manner, but there will be an implied comparison for the purposes of CONC 3.5.7R(1)(b) if it may reasonably be inferred that a comparison is being made.3
(4)
A statement about matters such as the speed or ease of processing, considering or granting an application, of entering into an agreement, or of making funds available, may constitute an incentive for the purposes of CONC 3.5.7R(1)(c). This will depend on the context of the statement and the circumstances in which it is made. A statement will be an incentive where it is likely to persuade or influence a customer to apply for credit or to enter into an agreement under which credit is provided, or is presented in a way which is likely to have that effect.3
(5)
Other examples of things which could be incentives are gifts, special offers, discounts and rewards.3
(6)
CONC 3.5.7R applies to a firm with respect to a financial promotion for an authorised non-business overdraft agreement except a firm of a type listed in CONC 5C.1.2R(2).7

Annual percentage rate of charge

CONC 3.5.9R06/04/2020

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”;7
(3)
the representative APR must be accompanied by the word “representative”; and7
(4)
where the financial promotion is:7
1. (a)
  in writing; and7
2. (b)
  for an authorised non-business overdraft agreement, 7
the representative APR must be accompanied by the following information:7
1. (c)
  a statement as follows:7
  “How does our overdraft compare?”; and7
2. (d)
  wording, in plain and intelligible language, that explains to customers that the purpose of a representative APR is to enable customers to compare the costs associated with different credit products; and7
this information must be given reasonable prominence and be in sufficiently close proximity to the representative APR to make it reasonably apparent to customers that the relevant wording relates to the representative APR. 7

[Note: regulation 7 of CCAR 2010]

CONC 3.5.9AR06/04/2020

7CONC 3.5.9R(4) applies only to financial promotions that are in writing. In accordance with GEN 2.2.14R, this means financial promotions that are in legible form and capable of being reproduced on paper, irrespective of the medium used. The rule does not, therefore, apply to a financial promotion communicated by means of television or radio broadcast.

Ancillary services

CONC 3.5.10R02/11/2015

(1)
A financial promotion must include a clear, concise and prominent3 statement in respect of any obligation to enter into a contract for an ancillary service where:
1. (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
2. (b)
  the cost of that ancillary service cannot be determined in advance.
[Note: regulation 8 of CCAR 2010]
(2)
The statement in (1) must be presented together with any representative APR included in the financial promotion.3
(3)
This rule does not apply to a financial promotion for an authorised non-business overdraft agreement.

Security

CONC 3.5.11R01/04/2014

Where a financial promotion concerns a facility for which security is or may be required, the promotion must:

(1)
state that security is or may be required; and
(2)
specify the nature of the security.

[Note: regulation 9 of CCAR 2010]

Restricted expressions

CONC 3.5.12R02/11/2015

(1)
A financial promotion must not include:
1. (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;
2. (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;
3. (c)
  the expression “no deposit” or any similar expression, except where no advance payments are to be; or3
4. (d)
  [deleted];3
5. (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]
(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 person 1 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

CONC 3.5.13R01/04/2014

(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:
1. (a)
  a rate which exceeds the APR by not more than one; or
2. (b)
  a rate which falls short of the APR by not more than 0.1; or
3. (c)
  where applicable, a rate determined in accordance with (4) or (5).
[Note: paragraph 2 of schedule to CCAR 2010]

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:
1. (a)
  three or more repayments are to be made at equal intervals; and
2. (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]
(6)
The relevant date in (5) is:
1. (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;
2. (b)
  in any other case, the date of making the agreement.

Promotions relating to non-business overdraft agreements

CONC 3.5.14G18/12/2019

5 6A direct offer financial promotion made in writing and relating to a non-business overdraft agreement will also need to comply with the rules in BCOBS 2.2B (General information about overdrafts for personal current accounts) where those rules apply.

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