22 May 2020

The Advertising Standards Authority ("ASA") has published its ruling on a TV ad for Clear Score Technology Ltd ("ClearScore"), confirming its decision to ban the ad by the financial technology company after finding that it breached the UK Code of Broadcast Advertising ("BCAP Code") rule 14.11.

By way of context, the BCAP Code applies to all advertisements and programme sponsorship credits on radio and television services licensed by Ofcom. Rule 14.11 provides that the advertising of unsecured consumer credit or hire services by consumer credit businesses or consumer hire businesses and / or credit brokering businesses or related credit services is only acceptable if the advertiser complies with the financial promotions requirements imposed by the Financial Services and Markets Act 2000 ("FSMA") and the rules set out in chapter 3 of the Financial Conduct Authority's ("FCA's") Consumer Credit Sourcebook ("CONC").

CONC Chapter 3 requires financial promotions concerning consumer credit to be, amongst other things, "clear, fair and not misleading". This requirement is key to the ASA's ruling against ClearScore.

Advert description

The TV ad featured two men, one of whom was morphed with a zebra’s head and tail. The man with a zebra’s head pointed to the sky where a graphic of a transparent bubble appeared. Inside the bubble was text stating “Your credit score is”, beneath which was a credit score stating “out of 700”. Smaller text below stated “moving on up”. Further, a voiceover stated, “ClearScore shows you pre-approved offers on credit cards, loans and more ...” The camera zoomed in on the bubble and a credit card appeared inside it.

Small superimposed text at the bottom stated “18+ Registration required. T&Cs apply”. The voiceover continued, “… all from trusted lenders.” Large text then appeared in front of the screen with the ClearScore name and logo. Smaller text underneath this stated “Your credit score and report, for free, forever”, followed by the Apple and Google app logos. The voiceover then ended with “Download the app for free today.”

Issue

The complainant, whose application for a pre-approved loan was declined, challenged whether the claim “ClearScore shows you pre-approved offers on credit cards, loans and more …” breached the BCAP Code.

ClearScore's response

ClearScore said the claim “ClearScore shows you pre-approved offers on credit cards, loans and more …” was not misleading and the decision to pre-approve an individual was made solely by the lender. When a customer accessed a list of available pre-approved loan offers on ClearScore, ClearScore would send financial information about that customer, through an Application Programming Interface ("API"), directly to the lenders offering loans. The lenders would then run these details through their scorecards and provide their results via the same API.

Depending on the lender's credit policy, if the result was positive the customer would be able to see on ClearScore the terms on which they had been pre-approved by the lender.

ClearScore said the customer data they passed on to lenders depended on a case-by-case basis but ordinarily the data shared would be a customer’s first name, last name, email address and date of birth. Other data could include income, monthly expenditure, residential status, employment status, requested loan term/amount, and monthly rent payments.

ClearScore explained that this was merely an eligibility, and not a lending, decision. If the outcome was pre-approved then the customer was likely to obtain that product, provided that the details were correct and subject to lenders’ additional affordability and fraud checks. ClearScore said the claim clearly stated that a person could see offers for which they had been pre-approved for by a lender in the ClearScore platform, and that lenders displayed these offers on ClearScore. They considered that their claim was therefore factually correct. ClearScore said it did not make any lending decisions and was not privy to lenders’ decision-making criteria.

As a regulated term, the decision to “pre-approve” was not entirely up to the lender and ClearScore therefore monitored the use of the term to ensure that it was compliant with the relevant regulations. ClearScore said that the FCA rules stated that a financial promotion must not state or imply that credit is available regardless of the customer’s financial circumstances or make any statement or implication that credit was guaranteed or pre-approved. They said their ad only informed customers that such offers existed on ClearScore, and the financial promotion which the complainant was subsequently shown on ClearScore’s website was specifically addressed to him and included the disclaimer “This product is pre-approved for you. This means if all the details you’ve given us are correct and subject to additional checks, you’ll get this product”. They said that this statement was included because there were occasions when a lender could reject a pre-approved applicant.

Clearscore said they had contacted the lender to query why the complainant was rejected for the loan and the lender explained that the complainant had been informed that he did not meet the affordability criteria. The lender said that under their affordability rules, the FCA had altered the credit assessment rules for lenders which now mandated that lenders could also take into account whether applicants could reasonably repay the loan. That was usually assessed by verifying the applicant’s income, which could not be done in the complainant’s case as the documentation provided was insufficient.

ClearScore confirmed that products were listed dependent on the information supplied by the applicant, or the likelihood of being accepted. Some of these offers would be pre-approved, provided the details they had provided in their ClearScore application were correct, as well as being subject to the lender’s own fraud check. ClearScore therefore felt the claim “ClearScore shows you pre-approved offers on credit cards, loans and more …” was factually accurate and this had been qualified by the superimposed text which included “T&Cs apply”.

Once pre-approved, the applicant would need to supply evidence to the lender to support the initial information provided on ClearScore in order to obtain the loan. Clearscore felt that this was something the average consumer would consider to be self-evident and was not a material condition that would need to be explicitly stated in the advert.

The ruling

Upheld.

ClearScore was a financial technology company which provided customers with free access to their credit score and report. They also provided customers “offers” for pre-approved loans, credit cards and other financial products which were based on their credit history and borrowing behaviour.

The ASA recognised that generally, “pre-approved” loan offers were made based on the personal information an applicant provided to the lender, such as their income, employment status, or credit score. The ASA consulted the FCA on the application of the relevant CONC rules and guidance. CONC rule 3.3.1 stated that “A firm must ensure that a communication of a financial promotion is clear, fair, and not misleading”. Further, CONC rule 3.3.1 (d) stated that a firm must ensure a financial promotion “is sufficient for, and presented in a way that is likely to be understood by, the average member of the group to which it is directed ….”.

The ASA felt that because ClearScore had used the term ‘pre-approved’ as a selling point in their financial promotions, they needed to ensure the use of this term was clear, fair and not misleading, despite them not making any lending decisions. ASA considered that the average consumer would understand the term “pre-approved” in the ad to mean that they were guaranteed to get any loan or product shown to them as pre-approved when using ClearScore’s services. The ad did not indicate that further checks would be made following a pre-approved offer, which could result in the application being declined.

Because the claim “pre-approved” was likely to be understood to mean that customers who received “pre-approved” offers would be guaranteed to get those offers, when that was not the case, the ASA concluded that the ad breached BCAP Code rule 14.11 and said it must not be broadcast again in its current form. The ASA told ClearScore to both ensure its advertising complied with the requirements of CONC, and to make clear in their broadcast advertising that the pre-approved offers shown by ClearScore would be subject to additional checks by the lender prior to approval.

Commentary

In the background section to BCAP Code rule 14, the Committee of Advertising Practice ("CAP") which writes both the non-broadcast advertising code, the CAP Code, and the BCAP Code recognises that deciding whether to opt for a financial product or service may be a complex decision for some consumers, requiring considerable forethought. Specifically, CAP says "selecting the most relevant financial products or services normally requires consumers to consider many factors; short-form television and radio advertisements are not well-suited to communicating large amounts of detail". It goes on to state that while the ASA and BCAP Executive may seek advice from other regulators when investigating possible breaches of the BCAP Code, they will apply their usual standards and Code rules to prevent misleading advertising and require significant exceptions and qualifications to be made clear.

CAP Guidance on this section of the Code reiterates that the CAP and BCAP Codes provide general guidance on advertisements for financial products and services but recognises that financial advertising is subject to numerous statutes and regulations. However “non-technical” aspects of consumer credit ads (for example, misleadingness, offence, social responsibility, superiority claims, fear and distress and competitor denigration) are likely to fall within the remit of the CAP Code. The ASA has a statutory responsibility to investigate complaints about broadcast advertisements, and, in liaison with the FCA, will consider complaints about technical aspects of financial services ads in broadcast media.

In this case, CONC rule 3.3.1 (d) is also reflected in the section of the BCAP Code rules on misleading advertising (Rule 3), so there was no need for the ASA to specifically refer to BCAP Code Rule 3 It should also be remembered that the CAP and BCAP Codes reflect the provisions of the Consumer Protection from Unfair Trading Regulations 2008 ("CPRs"). This means that the likely effect of an advertisement is generally considered from the point of view of the average consumer who it reaches or to whom it is addressed. The average consumer is assumed to be reasonably well-informed, observant and circumspect. If the ad is directed to a particular group, the advertisement will be considered from the point of view of the average member of that group. If an ad is likely to affect the economic behaviour only of an identifiable group of people who are especially vulnerable, in a way that the advertiser could reasonably foresee, because of for example, their financial circumstances, the ad will be considered from the point of view of the average member of the affected group.

There are numerous rulings demonstrating the ASA's approach and its latest ruling against ClearScore highlights the importance of ensuring, when advertising financial products, services and investments, that the detail that is offered to consumers is clear, fair and not misleading or in ASA terms, legal, decent, honest, and truthful, and is presented in a manner that can be easily understood. Whilst advertisers should always be careful about ensuring that terms used are as clear and accurate as possible, the ASA's ruling against ClearScore emphasises the need to ensure that advertisers should also consider how the average consumer of the target audience will be likely to understand terms used, to avoid being in breach of either CONC or Advertising Code requirements.

Contribution from Amelia Green, Trainee Solicitor