Loans adverts go under microscope

More people are likely to find debt repayments difficult in the recession

Loan adverts and price comparisons are being put under the microscope by an industry watchdog during the recession.

The Advertising Standards Authority (ASA) said that social responsibility would be a key issue when looking at complaints on adverts offering credit.

The watchdog said various landmark rulings has set the standards which advertisers must adhere to.

It has ruled against firms that misled viewers or trivialised the issue of consolidating debts.

A lenders' trade body said companies took their responsibilities seriously when dealing with customers.

The ASA report said that the economic downturn affected the quality of advertising and the kind of appeals made to consumers.

"The economic downturn makes it even more important to protect consumers from being misled," it said in its annual report.

This meant considering "social responsibility, truthfulness and transparency" when studying adverts that, for example, promoted putting various debts in one pot to pay off.

'Vigilant'

The ASA's chairman, Chris Smith, said that the authority - which announced a record number of complaints about adverts in 2008 - needed to be "vigilant" on behalf of the consumer.

Our priority is ... to help provide a level playing field where companies can make legitimate claims about their products and services ASA annual report Top 10 most controversial ads

Adverts, including a growing number online, for financial products and price comparison websites were among those increasingly in the spotlight during the year.

This included banning a television advert for Picture Financial Services which showed a man playing football and being filmed by his wife at the same time as applying for a loan on the telephone.

"The ASA Council found the advert to be misleading for implying that consolidating unsecured loans was a decision that could be taken lightly," the report said.

Others were banned for not outlining key conditions of a loan or because they seemed to encourage irresponsible spending.

'Level playing field'

The ASA report said that price comparisons were becoming more prominent as companies battled for brand loyalty with consumers who were now willing to switch suppliers of goods and services.

Complaints about the Picture Financial Services advert were upheld

As a result, there had also been a "steady rise" in the number of complaints about adverts which made comparisons over price, increasing by 14% in 2008 on the previous year.

"Our priority here is to ensure that ads do not mislead consumers and to help provide a level playing field where companies can make legitimate claims about their products and services," the report said.

It said there had been issues with exaggerated or unclear price comparisons.

The ASA rules state:

• Documentary evidence is needed to back up competitive claims
• Products being compared must be of the same or very similar quality, and sale prices must be compared with sale prices
• Consumers must be given enough information to make the comparison themselves.
• Exaggerating the length of time prices have been lower must be avoided.

The ASA said it expected more such complaints in 2009.

The issue of adverts about loans came as a trade body - the Finance and Leasing Association (FLA) - said that new business for unsecured loans had dipped significantly in the first two months of 2009.

An unsecured loan is a loan where the lender does not use the customer's house as security, and the FLA said that rising unemployment and low consumer confidence had hit demand for this type of credit.

The FLA's head of consumer finance, Fiona Hoyle, said members were careful when it came to accepting customers.

"[Lenders] subscribe to the industry's Lending Code, which means that all loan applications will undergo a sound and proper credit assessment," she said.

"Customers will also receive detailed and accurate information about the loan, to allow them to make informed decisions on whether to proceed."