Financial Promotions and Consumer Duty

Avoiding Common Pitfalls for Consumer Credit Firms

Financial promotions remain one of the highest-risk areas for consumer credit and secured lending firms. Misleading, unclear, or incomplete promotions can quickly attract regulatory attention, reputational damage, and, in some cases, enforcement action. The FCA has emphasised that compliance with CONC 3, the Consumer Duty, and broader advertising standards is essential for firms seeking to demonstrate fair treatment of customers.

This blog explores common pitfalls in financial promotions, the regulatory expectations under Consumer Duty, and practical guidance for firms looking to maintain compliant marketing practices.

The Regulatory Context

Consumer Credit Firms and Marketing Compliance

• CONC 3 (Consumer Credit Sourcebook) governs the content and clarity of consumer credit promotions. It requires adverts to be clear, fair, and not misleading, including both traditional and digital channels.
• Consumer Duty (effective 2023) extends these requirements by obliging firms to deliver good outcomes for consumers, including those who are vulnerable. Firms must demonstrate that promotions enable informed decisions and avoid disproportionate risk.

Collaboration with ASA and CMA

• The Advertising Standards Authority (ASA) and Competition and Markets Authority (CMA) continue to monitor promotional content, including online, social media, and influencer campaigns.
• FCA and ASA guidance increasingly emphasises the need for accurate representation, particularly where claims relate to interest rates, approval criteria, or product benefits.

Common Pitfalls in Financial Promotions

1. Headline Rates Without Qualification
   • Using “representative APR” or “lowest rate” claims without clear qualifying conditions.
   • Risk: Consumers may be misled about the likelihood of receiving the advertised rate.
2. Misleading Comparisons
   • Claims of “best rate” or “guaranteed approval” that do not reflect underwriting reality.
   • Risk: Contradicts Consumer Duty’s fair outcomes requirement.
3. Incomplete Disclosure of Risks and Costs
   • Particularly relevant for high-cost, subprime, or secured lending products.
   • Risk: Consumers cannot make informed decisions if all fees, charges, or penalties are not clearly explained.
4. Digital Marketing Oversights
   • Social media posts, influencer promotions, affiliate channels, and comparison sites often fail to provide balanced information.
   • Risk: Firms remain accountable for third-party promotional content.
5. Identification of the Responsible Firm
   • Promotions must clearly state the regulated entity responsible.
   • Risk: Non-identification may result in regulatory scrutiny or consumer confusion.

Practical Steps for Firms

1. Review All Promotions for Compliance
   • Conduct thorough audits of traditional and digital channels.
   • Test adverts against Consumer Duty standards: do they support informed decision-making?
2. Maintain a Promotions Approval Framework
   • Ensure all materials are approved by a compliance function or authorised person before publication.
   • Include oversight of third-party introducers, affiliates, and influencers.
3. Train Staff and Third Parties
   • Educate teams and partners on FCA rules, Consumer Duty obligations, and the importance of accurate, clear communications.
4. Document Processes and Decisions
   • Keep evidence of approvals, risk assessments, and monitoring to demonstrate proactive governance during FCA supervision or thematic reviews.
5. Prepare for Thematic Reviews
   • FCA increasingly conducts reviews targeting financial promotions, online marketing, and treatment of vulnerable consumers. Firms should maintain comprehensive records to facilitate inspection.

Consumer Duty Considerations

Consumer Duty requires firms to take a consumer-first approach in all promotions:

• Clarity: Use plain language and avoid complex terminology.
• Fairness: Avoid exaggeration or promises that cannot be fulfilled.
• Accessibility: Ensure information is available and understandable to all customers, including those who are vulnerable.
• Monitoring: Track the impact of promotions on customer decisions and outcomes.

Failing to integrate Consumer Duty principles into promotional strategies can result in regulatory action, fines, or reputational damage.

Pros and Risks of Digital Promotions

Pros:

• Wider reach and more targeted campaigns.
• Opportunity to educate and inform consumers.
• Measurable engagement metrics.

Risks:

• Rapidly changing content may bypass compliance review.
• Influencer and affiliate campaigns may be inconsistent with firm policies.
• Online complaints and social media scrutiny amplify regulatory risk.

How ALPH Legal Can Help

At ALPH Legal, we work with consumer credit and secured lending firms to embed robust financial promotions compliance:

• Independent Audits: Review all channels to identify risks and gaps.
• Policy Development: Implement frameworks aligned with CONC 3, Consumer Duty, and FCA guidance.
• Compliance Oversight: Ensure structured approval and monitoring of promotions.
• Training: Educate staff, introducers, and affiliates on compliance requirements.
• Strategic Advice: Align marketing practices with broader governance and operational strategy.

Firms that prioritise compliance in financial promotions not only reduce regulatory risk but also strengthen consumer trust and brand reputation.

Final Thoughts

Financial promotions are a critical interface between consumer credit firms and their customers. Under the FCA’s evolving supervisory approach, especially within the Consumer Duty framework, clarity, fairness, and oversight are non-negotiable. Proactive management of promotional content and robust governance frameworks enable firms to meet regulatory expectations while leveraging marketing opportunities effectively.

For tailored support on financial promotions compliance, Consumer Duty alignment, and operational oversight,  contact us directly.