Which? puts watchdog’s teeth on edge

Consumer group Which?’s criticism of the Financial Services Authority (FSA) for failing to “name and shame” misleading advertisers has thrown the FSA’s role as an advertising regulator into the spotlight.

Which? spoke out after the FSA issued an ultimatum to insurance companies to stop using misleading savings claims in advertising or face regulatory action (MW last week). Which? called on the watchdog to follow the Advertising Standards Authority’s (ASA) example to name firms flouting the rules.

Different methods The stance demonstrates what, for many, is a confusing soup of legislation governing the marketing of financial services. One problem is that the way in which the ASA and FSA dictate their decisions is different. Many ads escape censure from the ASA because companies are allowed to make statements if at least one in ten people who apply will be offered a significant saving. The FSA, however, believes such offers should only be made if they apply to most people.

And while the ASA can rule on headline claims and body copy, it has no authority to challenge the “legal” aspects of a financial ad; making the system, to a layman at least, incredibly confusing.

Thus the FSA says it is unfair to try to compare the regulators given each remit is different. An FSA spokesman says that while the self-regulatory ASA publishes offenders’ names on its website, it can only respond in relation to a specific complaint. He says the FSA survey was a “proactive” piece of work, rather than something that was triggered by a specific complaint.

The FSA carried out a review of press ads from companies selling motor, home and travel insurance and found that more than half of motor insurance and a quarter of home insurance ads containing savings claims were unclear or misleading.

The spokesman adds: “The action we have taken is designed to be a warning shot. Unlike the ASA and the OFT, the FSA doesn’t have to rely on consumer complaints in order to look at this. This is a wake-up call to the industry.” He argues that the authority, which is responsible for regulating the industry – apart from credit card and loan products, which fall under the OFT’s remit – is not shying away from its responsibilities to consumers.

“This is not an area where we are toothless or not willing to take action,” he says, adding that the FSA will review the situation in three months and decide whether to pursue regulatory action, such as fining and naming offenders.

Sympathy for the FSA CCHM:ping chairman Lucian Camp sympathises with the authority, which he says adds “an extra layer of regulation” in a country which has traditionally split advertising regulation among a variety of bodies.

He believes this approach, rather than an “unworkable” rigid set of rules, is one reason why some in the industry are calling for the authority to pre-clear print ads. Camp adds: “It can leave the industry wondering how to interpret those principles and if it doesn’t agree with those interpretations it can give firms a hard time.” He thinks to name at the first opportunity would be an unfair mistake that could end in driving marketers away from product-specific advertising.

Even so, even the FSA admits financial services companies stand to lose consumer trust if they do not shape up. “It is a cumulative effect,” says the spokesman. “If consumers are unable to trust the ads they won’t trust the industry.”

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