Financial Promotions Dear CEO Letter: forget waiting for Consumer Duty it’s already here …
On 6th May the FCA issued a Dear CEO letter to almost 28,000 consumer credit firms. The letter sets out FCA concerns with the quality, presentation, and oversight of financial promotions across the sector.
The FCA is clear they will not wait for Consumer Duty to come in before they act. The letter delivers an unambiguous warning that failure to deliver on customer outcomes will lead to regulatory censure.
As several of the concerns are relevant across all sectors of the market, for example media platforms, the letter is a must read for any FCA regulated firm issuing financial promotions.
The heightening cost of living crisis has ratcheted up the regulatory spotlight on credit firms, and the FCA intend to keep the sector ‘under close review’. Increased demand for credit, caused by changing customer circumstances, needs to be carefully managed. For any firm in the credit sector, this letter is more than a must read, it’s a must act….
What are the key takeaways?
Culture and governance:
One of the key elements that regulators consider when investigating a firm or an issue, is culture and the effectiveness of the governance arrangements in place. For example, is your Board aware of how many vulnerable customers respond to your marketing and have you made any changes because of this?
Use of online media platforms:
The use of online media platforms to promote services and products is specifically called out as a challenge. This type of promotion must still comply with the relevant rules on a standalone basis regardless of character limits or constraints on certain social media channels (e.g., Twitter or Instagram). For example, when using influencers firms should have guidance notes that include a clear list of dos and don’ts.
Clear fair and not misleading:
Several concerns highlighted in the letter pertain to firms’ failure to clearly provide adequate representation of services and appropriate risk warnings. Similarly, there are examples of Firms using inappropriate trigger phrases, or using triggers without the required appropriate APR’s. Anyone approving a financial promotion should have a thorough understanding of the product and services being promoted and the rules that apply.
Don’t forget the Advertising Standards Agency:
Over recent months we have seen the ASA exercising increased powers over firms offering financial services products. Social responsibility is a key theme of the ASA and one that fits perfectly with FCA objectives. Good firms will measure compliance against ASA standards as well as FCA requirements.
Be clear on what constitutes a financial promotion:
The letter suggests that several firms are still not clear on the matter, and the FCA take the opportunity to clarify that “any form of communication (including through paid for Google ads and social media) is capable of being a financial promotion, depending on whether it includes an invitation or inducement to engage in financial activity.
Systems and Controls:
Firms must have robust systems and controls in place for the approval and ongoing monitoring of financial promotions. In addition, firms must also have adequate oversight procedures for the initial and ongoing due diligence and monitoring of third parties that issue promotions. This includes quality MI and review of any feedback highlighted in customer complaints.
What you need to do:
The letter gives clear instruction of what the FCA expect credit firms to do:
Draw the matter to the attention of your Board
Review all your current financial promotions for compliance across all media platforms
Consider conducting a review of your financial promotion systems and controls.
How we can help:
Avyse Partners can work with you to ensure that your financial promotions and oversight processes are sufficiently robust.
We have extensive experience working with credit firms, and our team have experience of working in the FCA Financial Promotions department
We have social media marketing guides that can be tailored to your business
We are experienced in reviewing financial promotion material and providing practical feedback
We understand what is required of financial promotion systems and controls reviews and the need for proportionality and practicality
We have worked with firms big and small to review and train on financial promotion processes. And we’ve done this for both front-line marketers and second line compliance.
Get in touch to discuss how we can help.
