Misleading financial services adverts
Accountants Grant Thornton claim that 76% of the 117
ads it examined failed the standards set by the Financial
Services Authority (FSA). The research was conducted by
visiting at random branches of financial services companies,
including high street banks, building societies and insurance
firms. The available literature and promotional material
was then checked against the FSA standards. Grant Thornton
said that "advertisers need to play by the rules
and not exploit a lack of awareness among their target
market."
The following misleading points were highlighted by the
report-
- Advertising "headline grabbing" deals
or cheaper premiums which were not available in practice,
with more expensive premiums quoted when the organisation
was telephoned.
- Saying premiums were cheaper than a competitor's
by comparing a basic product with a rival product that
offers a more comprehensive cover.
- Using scare tactics such as 'one out of three
people will get cancer in their lifetime', but failing
to point out that some forms of cancer are not covered.
- Omitting obligatory warnings, such as income
will be subject to tax or that values of funds could go
down as well as up.
- Making claims that are untrue or improvable,
such as claiming products offered "the best rates"
or "mortgage rates are at their lowest for years",
when rates have risen since 2003.
- Using jargon to confuse consumers, such as MVR,
LTV, IVA, CCJ and descriptions such as "core plus
satellite".
FSA regulations require companies advertising financial
products make sure that their adverts are clear, carry
risk warnings, don't make misleading claims and spell
out any penalties or charges that may be incurred. Last
month, the FSA said it was keeping a close eye on insurance
advertising, especially for critical illness polices.
It pointed out that too often these use scaremongering
tactics about the prevalence of illnesses like cancer,
and include unsubstantiated claims or use key words or
exclusions that are not prominent enough. The FSA warned
that if the problems continued it would not hesitate to
take action.
April 2006
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