How did unclear communications lead to an FCA fine?

Screen GearsOn 17 February, the Financial Conduct Authority fined car finance provider, Moneybarn Ltd, £2.77 million for failing to treat customers fairly.

What was the fine for, and as a Marketer, how can you help to ensure that your firm avoids falling foul of the financial regulator?

Why did the FCA fine Moneybarn?

The Moneybarn fine was levied because the company didn’t treat its customers fairly when they fell behind on loan repayments while in financial difficulties.

Importantly for Marketers, the fine was also due to Moneybarn failing to communicate ‘the likely financial consequences of failing to keep up with payments to customers in a way which was clear, fair and not misleading’.

Over 1,400 customers – many of whom were vulnerable – subsequently defaulted after they entered into unsustainable short-term repayment plans.  

Moneybarn has responded to the failings – which the FCA called ‘serious breaches’ – by voluntarily paying more than £30 million in redress to customers potentially affected. This positive action meant that the fine imposed by the FCA was reduced.

Nonetheless, a £2.7 million fine is a significant blow for any business.

What can you do to ensure your firm’s financial promotion and customer communications treat customers fairly?

Treating customers fairly

Treating customers fairly, often shortened to TCF, is a big focus for the FCA.

What does it mean? It means that any marketing, advertising or sales materials need to be clear, fair and not misleading. They also have to meet guidelines on suitability – particularly important if you are communicating with vulnerable consumers.

This was relevant in the Moneybarn case, as many of the Moneybarn customers are people who typically cannot access finance from mainstream lenders due to their personal circumstances. Announcing the fine, the FCA noted that:

‘Such customers are at an increased risk of financial vulnerability as they often have a poor or no credit history or past problems with credit due to periods of unemployment, ill-health or other adverse life events. They are also at greater risk of suffering detriment if they fall into arrears.’

If these sound like your customers, it’s even more important that your financial promotions and communications comply with the TCF rules.

What does treating customers fairly mean in practice?

If you want to ensure you treat all your customers – vulnerable or otherwise – with the degree of fairness the FCA demands, what should you be doing?

  • Familiarise yourself with, or refresh yourself on, the FCA’s financial promotions rules. Our blog, What is a financial promotion? – fundamentals for marketers provides some good background.
  • Ensure your firm’s advice and financial promotions are suitable for your audience.
  • Make sure all promotions or client communications feature the correct disclaimers, displayed with the required prominence.
  • Check that your small print is fair, and includes all the information it needs to.
  • Ask whether every promotion and communication you publish complies with the guidance on fair treatment.
  • Ensure any data included in promotions, including on performance and fees, is completely accurate. Some firms have found that online slide and document libraries help here, giving easy access to accurate, current and compliant wording and allowing approved data to be ‘locked down’ to prevent errors.
  • Produce adverts that meet the requirements – not just of the FCA but also of the ASA/CAP, who regulate all UK advertising. Read more about how you can avoid producing misleading adverts.
  • Double-check that your promotions copy meets FCA requirements around clarity and substantiating claims.
  • Don’t forget about Compliance team approval. Ensure your Compliance team reviews and provides the requisite sign off for client communications and financial promotions. An element of automation can help here, speeding the process and mandating the appropriate sign-off.
  • Because financial promotions rules are platform-neutral, your website and social media also fall under the rules. Ensure they’re compliant too.

The FCA isn’t afraid to dish out fines where it sees firms’ marketing activity falling short of its standards. Our blog earlier this year reported that misleading financial promotions had landed a firm with a fine from the regulator, and we looked in another blog at the various ways the FCA can challenge what it sees as unclear, unfair or misleading promotions.

Ensure you’re treating customers fairly

Hopefully the tips above have given you some good pointers. If you want to read in more depth about the treating customers fairly rules, you can download our TCF FAQs. They explore the FCA requirements and the ways that Marketing teams can meet them. You can download a copy from our resource library.

Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.

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