The FCA Is Cracking Down on Financial Promotions - Many Businesses Are Not Ready

Financial promotions are everywhere, and for many businesses they have become just another part of everyday marketing. The problem is that promoting finance is not just marketing, as it can amount to regulated activity, and the Financial Conduct Authority (FCA) is taking a much closer look at how businesses are getting it wrong.

This increased scrutiny is no longer limited to traditional financial services. In fact, any business offering finance to customers may fall within scope, which means expectations around compliance, clarity and transparency have been raised across multiple sectors. Many firms are still relying on outdated assumptions about what is acceptable, which is exactly where the risk lies.

This is not new regulation, but a shift in enforcement, with the FCA applying existing rules more closely and consistently. This article looks at why that is happening, where businesses are falling short and what it means in practice.

What the FCA actually means by ‘financial promotions’

A financial promotion is any communication that invites or induces a customer to engage in a regulated financial activity. In simple terms, this can include website content, social media posts, paid ads, email campaigns and in-store signage. It is no longer limited just to formal adverts, and most businesses do not realise that they are already doing this.

Why the FCA is cracking down now

There is no single reason for the shift from the FCA to pay more attention to marketing and advertising. It is down to a combination of trends that have made poor financial promotions a bigger risk to consumers. Consumer Duty has been one of the biggest drivers, which was introduced by the FCA to raise the standard for how businesses treat their customers.

It means that businesses must act to deliver good outcomes for customers. They should not just avoid being misleading, they must actively ensure that customers understand what they are signing up for and are not being misled by how something is presented. Marketing is often the first point of contact a customer has with finance, so if this is unclear, unbalanced or misleading, the customer will start from a bad position and this is likely to be consdered a failure under Consumer Duty.

There has also been an explosion of online and social media marketing that allows businesses to promote finance through a range of different online platforms. The informal tone that the likes of Facebook, Instagram and TikTok promote means there is a relaxed attitude towards compliance. Their short-form content also means that businesses can miss out key information. The desire to post quickly also means there can be less oversight over the content. This is a concern for the FCA because consumers are increasingly making decisions based on quick, surface-level content, which increases the risk of misunderstanding.

A growth in ‘buy now, pay later’ and embedded finance means that finance is built into everyday purchases. Embedded finance means that finance can now be found at retail checkouts through online shopping and in service-based businesses. This matters because customers are offered finance instantly with minimal friction, and it can start to feel like a normal payment option rather than a credit agreement. Customers may therefore not fully understand that they are entering into credit, and key information can be overlooked. ‘Buy now, pay later’ has historically been subject to less direct regulation, and rapid growth has raised concerns about consumer understanding, which is why the FCA is paying much closer attention.

Sadly, there have also been poor practices across multiple sectors, with the FCA seeing businesses highlighting benefits, downplaying or omitting key information and using unclear or vague language. There are promotions that are technically presentable but are not clear, balanced or properly explained. Most businesses are not doing this deliberately, they simply do not understand the rules or assume that what they are doing is fine. The FCA is reacting because these small issues, when repeated across thousands of businesses, create widespread consumer risk.

Where businesses are getting it wrong

• Misleading or incomplete messaging

Some businesses start to highlight the benefits of financial promotions without outlining the risks equally as clearly. They also find themselves over-promising affordability and not explaining the key terms clearly enough.

• Missing or incorrect representative APR

A representative APR is required in many financial promotions Depending on how the offer is presented, but it is often missing, hidden, or incorrectly calculated. This is considered to be a major compliance failure.

• ‘0% finance’ misuse

0% finance can sometimes be presented as free without any context. This lack of explanation around eligibility or conditions can prove to be misleading if it is not balanced.

• Social media content

The informal tone of many social media platforms can lead to relaxed compliance. Businesses have tended to forget that stories, reels and captions will still count as promotions. There is also a risk from influencer or third-party content not meeting regulation guidelines.

• Website compliance issues

When businesses put their website together, finance messaging can tend to be scattered across a number of different pages. This can mean that key information is missing or unclear, and disclaimers might not be visible or effective.

Most of the issues that businesses face are not intentional, but they are breaches that still require attention and correction.

The gap between what businesses think is compliant and what actually is

The majority of businesses do not intend to mislead, but the FCA is more interested in whether a consumer could clearly understand what is being offered. This means that the standard should be for all promotions to be clear, fair and not misleading. Clear means it needs to be easy to understand and fair means that it should be balanced and not biased in any way. To avoid something being classed as misleading, you need to ensure that there are no hidden implications.

What happens if you get it wrong?

Businesses can get their financial promotions wrong if they do not fully understand the requirements, and if this is found to be the case, the FCA can require promotions to be withdrawn or amended. They might also issue warnings and impose fines, and they can restrict business activity if they feel it necessary. This can lead to reputational damage and a disruption to the sales process.

It is important to remember that this applies to any business issuing or communicating promotions, no matter what this size might be. Small businesses are not exempt, even if they are not as visible as some of their bigger competitors.

What businesses should be doing now

It is important that all businesses take the time to review their financial promotions across their website, social media and advertising. They should be checking for accuracy of their APR as well as looking at the clarity of the messaging. It is also important to look at the visibility of key information.

All businesses need to ensure that they have internal processes in place and get compliance input before they publish anything. This should be an ongoing process and not a one-off to make sure you are always compliant and in line with FCA regulations.

This article is not talking about any new rules that have been brought in. All of these rules have been in place for some time, but the FCA is now enforcing them more aggressively. This means that businesses who offer finance cannot afford to treat compliance as an afterthought, as financial promotions are now a key area of risk. If your marketing involves finance, it is no longer just marketing, it is a regulated activity, so speak to The Compliance Guys to find out more about what you can, cannot and should say.