What Is a Financial Promotion and Why Does It Matter?

Almost every business in the UK that offers finance will communicate with its customers in one form or another. While most businesses think financial promotions only apply to banks or lenders, in reality the definition is much wider. Many businesses are already issuing financial promotions without realising that they are doing it, and if those promotions do not meet FCA requirements, they could expose the business to regulatory action. That’s why we are here to help you understand what counts as a financial promotion in order to take the first step in remaining compliant.

What is a financial promotion?

The FCA defines a financial promotion as “an invitation or inducement to engage in investment activity or certain consumer credit activities”. In plain English, this means a financial promotion is any communication that encourages, persuades or influences a customer to consider finance. It does not matter whether the communication is printed, digital, verbal or online. If it invites or encourages someone to enter into a regulated credit agreement, it may constitute a financial promotion.

A financial promotion does not have to mention a specific lender or finance product. Simply encouraging a customer to consider finance as a way to pay for goods or services may be enough for the communication to fall within the FCA’s financial promotions rules.

This means a financial promotion is not just selling finance but encouraging someone to consider it, and this is a very important distinction.

Why do financial promotions matter?

Financial promotions are often the customer’s first contact with finance. The FCA wants customers to receive accurate information and be able to understand the costs and risks that are involved. This means they want to avoid misleading advertising and allow the customer to make informed decisions.

A poor financial promotion can encourage unsuitable borrowing or hide important information. It can also be guilty of exaggerating affordability or misleading customers completely. This is why the FCA pays such close attention to them.

What counts as a financial promotion?

Financial promotions can take many different forms. They will often appear on the website of a business in a variety of ways. These promotions could be on the finance or payment option pages, but there may also be banners that say, “Finance Available”, homepage graphics, finance calculators, or buttons that say, “Apply For Finance”. If your website encourages customers to consider financing any way, it is likely to contain financial promotions.

Social media is one of the areas where businesses are most likely to fall foul of the financial promotions rules. Many organisations assume the requirements are less strict on platforms such as Facebook, Instagram, LinkedIn, TikTok or X, but this is not the case. The FCA does not treat social media differently simply because it is informal, and every social media post must therefore be standalone compliant. This means stories, reels, captions and videos might all contain financial promotions and must include the information required to comply with the FCA’s rules. Any reference to “spread the cost”, “drive away today from £299 per month”, “interest-free finance available” or “0% finance this week” could all count as a financial promotion on social media.

The same FCA rules apply when it comes to email marketing, whether you are sending a single email or sending it to thousands of subscribers. Newsletters, promotional emails, finance offers and seasonal campaigns might all encourage customers to take finance and therefore be considered a financial promotion.

Traditional printed advertising is still covered by the FCA, so they will pay attention to any financial promotions found on flyers, brochures, magazine and newspaper adverts or direct mail.

In-store advertising is also regulated by the FCA. This will include window stickers, posters and shelf-edge displays, as well as any finance leaflets, showroom signage or pull-up banners. If customers see finance being promoted in store, the FCA will still regard it as a financial promotion.

Talking about finance in a video is no different from writing about it, and the rules will still apply. This means that any mentions on YouTube, Instagram Reels, Facebook videos or Tiktok will still be considered to be financial promotions.

Verbal promotions tend to be the form of communication that many businesses forget about. If a salesperson says something along the lines of “most people take the finance” or “this is the best finance option” then they may be making a financial promotion. Depending on the circumstances, these conversations can be considered financial promotions or regulated communications, which is why staff training is so essential. Not every verbal conversation will be a financial promotion, so it is important to think about what your staff are saying and the context in which it is being said.

What must a financial promotion include?

The FCA standard is that everything within a financial promotion should be clear, fair and not misleading.

Clear means that customers should easily understand what is being offered, how it works and what they are agreeing to. In order to make sure you are compliant with this, you need to avoid jargon, confusing wording or any hidden conditions.

To be fair, you need to ensure that the benefits of what you are offering should not be exaggerated and the risks should not be hidden. Any financial promotion needs to present a balanced picture to the customer.

To avoid misleading customers, you should not hide costs, overstate savings, imply that everyone will qualify, or make unrealistic claims. You also need to ensure that important information is never buried in the small print.

Common mistakes businesses make

There are a number of common mistakes that many businesses make when it comes to dealing with financial promotions. A key one is advertising 0% finance without explaining the eligibility, availability or terms and conditions. Another common mistake is quoting monthly payments without providing sufficient context or any qualifying information.

Talking about representative APR can be another pitfall. If it is required, it is often missing, too small or difficult to see.

Social media can trip up a lot of businesses as they tend to think that it is something frivolous and the rules will not be applied in the same way, but the FCA does not make any distinction between you running financial promotions on Facebook or in a printed brochure.

Some businesses forget to think about their website updates and can add things like “Finance Available” without asking their compliance partner or team to review it.

Sales staff can also unintentionally create compliance issues by making statements they should not. It is easy to assume that because the communication is verbal, no one will be held to account, but this is not the case and exposes why it is so important for all staff to be properly trained.

What happens if you get it wrong?

If you get your financial promotions wrong, there are a number of possible consequences, including FCA intervention or having your promotions withdrawn or amended. You may also face enforcement action and financial penalties, along with the associated reputational damage and potential customer complaints.

How can businesses protect themselves?

To stay on top of your financial promotions, you need to review all of your communications on a regular basis. This means going through your website, emails, social media, printed advertising and in-store material to make sure that everything is compliant. This is most successful when you ensure that marketing and compliance work together and that all promotions are reviewed before publication. It is also essential that you put staff training in place and hold regular audits.

Financial promotions are often much broader than many businesses realise, and if your business promotes finance, you are probably already communicating financial promotions. It is important to remember that compliance is not just about the finance agreement itself, but the way it is advertised as well. Reviewing financial promotions before they are published is far easier than correcting mistakes afterwards. Taking the time to get them right helps to protect both your customers and your business.