Debt management and individual voluntary arrangements (IVAs)


INSIGHT
Published
Jun 16th '22
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In April 2014 the Financial Conduct Authority (FCA) assumed responsibility for the regulation of debt management companies. Depending on the type of organisation being promoted, ads for Individual Voluntary Arrangements (IVAs) or Protect Trust Deeds (PTDs) could fall either under the FCA’s jurisdiction, or the Advertising Standards Authority (ASA).

 

  • Is it FCA regulated?

A person acting solely as an insolvency practitioner, who does not offer other debt management advice or solutions, is excluded from the requirement for FCA authorisation. If an ad is solely advertising IVAs it is likely to fall outside the FCA’s remit, and would be dealt with by the ASA. If you are unsure which category your ad will fall into please contact either Copy Advice or the FCA. The same guidance applies to Protected Trust Deeds, a similar debt solution available in Scotland.

 

Ads for companies who are regulated by the FCA should adhere to the guidelines given in the Financial promotions and communications with customers guidance (CONC 3). However as with other financial ads, the Committee of Advertising Practice (CAP) Code does regulate “non-technical” aspects of ads for these companies, such as matters relating to offence, social responsibility, superiority claims, fear and distress, competitor denigration and claims that do not relate to specific characteristics of the product.

 

  • Do not imply endorsement or association with other organisations or bodies

For ads that are within the ASA’s remit, advertising rules state that ads must not claim the advertised product has been approved, endorsed or authorised by any public or other body if it has not or without complying with the terms of the approval, endorsement or authorisation.

 

In 2021 the ASA investigated if an ad that included “Government Created Debt Relief” along with the inclusion of “Government” or “Gov” in the website addresses and “UK Citizens Debt Help” in another ad was misleading. The ASA considered that the ads went beyond a statement that the form of help being offered was created by the UK Government and/or for UK citizens and suggested an association with either the Government or Citizens Advice and so therefore was considered a breach of the Code (Fidelitas Group Ltd, 27 January 2021).

 

The ASA also investigated a paid-for internet search ad which was headed “Step to Change – Free Government Debt Support – Step into Change”. The ASA considered consumers were likely to interpret the prominent heading to mean that there was some kind of association between the UK Government, the StepChange Debt charity and Step Debt Support, or that they had approved or endorsed Step Debt Support to help with debt matters. As the ASA did not see any evidence that the advertiser was linked to the Government or a charity, they considered the ad was misleading (National Direct Service t/a Step Debt Support, 27 January 2021).

 

 

  • Do not exaggerate the simplicity of the process or the amount of debt that can be cleared

If ads imply that anyone will be considered suitable, then they could be considered misleading as only those who meet the criteria will be considered for an IVA. Advertising rules state that ads should not mislead, while other rules state that they should not mislead by omitting material information. Ads are also likely to be considered misleading if they imply that eligibility checks are easier or more straightforward than they actually are. Ads could be considered an issue if they trivialise a decision that should be made with serious consideration.

 

The ASA investigated an ad which featured the claims “Anyone can now resolve unsecured debt” and “Take this 60-second quiz to qualify!” were misleading for implying that anyone who took the quiz would be able to resolve unsecured debt. The ASA considered that the advertiser would only be able to refer on enquirers who met the eligibility criteria for an IVA. In addition to this the ASA also considered that the use of a quiz format irresponsibly trivialised an application for such a service and Therefore there would be enquirers who they were unable to help with and so the ad was deemed to be misleading and that the ad also encouraged consumers to make an enquiry without giving it serious consideration (Flexible Digital Solutions Ltd, 7 April 2021).

 

The ASA also investigated the claim “Stop Creditor Calls. Stop Payment Demands Now” and if it overstated the ease of stopping creditor calls. While there may be a period of time where debtors were given a period during which creditors could not contact them. In that sense, calls and demands for payment from creditors would end. However, the ASA understood that while discussions about the scope of an IVA were still taking place after the breathing space period, creditors would once again be free to contact debtors. It was therefore considered that “Stop Creditor Calls. Stop Payment Demands Now” overstated the ease of resolving debt with an IVA and was likely to mislead (Financial Support Systems Ltd t/a nationaldebtservice.co.uk, 8 December 2021).

 

  • Hold evidence for objective claims

Marketers should ensure that they hold evidence to support all claims that are likely to be interpreted as objective. In the absence of sufficient evidence, the ASA is likely to consider objective claims misleading. The type of evidence likely to be required by the ASA will depend on the level of claim concerned and the context in which it appears.

 

In 2021 the ASA investigated the claims “can write off up to 85% of their debts” and “you may be eligible to write off up to 85% of your debt” to see if they were misleading due to exaggerating the likely amount that could be written off. The advertiser responded to state that they had seen data that this amount was possible and that as the claims stated “up to” then this was clear that not all debtors would achieve 85%. As the ASA did not see the evidence, then they considered the claims to be misleading (TFLI Ltd, 7 April 2021).

 

Also in 2021, the ASA considered the claim “Write Off Up To 80% Of Debt” in another ad. On this occasion the advertiser was able to substantiate the claim with evidence that 12% of their customers wrote off 80% or more of their debt, and so the ASA considered there was a realistic chance that, depending on their specific circumstances, customers would be able to write off that proportion. The ASA therefore concluded that on this occasion the claim was unlikely to mislead (Financial Support Systems Ltd t/a nationaldebtservice.co.uk, 8 December 2021).

 

  • Clearly state risks and fees involved

Marketing communications which omit material information, are likely to breach advertising rules, which states that marketing communications must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner. While there might be no charge for the initial enquiry or assessment, ads should not imply that the process of an IVA is ‘free’.

 

In 2020 the ASA challenged if the claims “free service” and “our service is free of charge” in two ads were misleading as the ads were referring to IVAs which are likely to incur a charge. The ASA considered consumers would interpret the “free” claims to mean there would be no charge for the advice and assistance they might receive for dealing with their debt as a result of making an enquiry. There was no immediate explanation that the claims referred to only the eligibility check (TFLI Ltd, 7 April 2022). Also in 2020, the ASA investigated the claim “Step to Change – Free Government Debt Support – Step into Change” was misleading as again the final outcome of an enquiry was an IVA which would likely incur charges. The ASA considered consumers would interpret the “free” claims to mean there would be no charge for the advice and assistance they might receive for dealing with their debt as a result of making an enquiry. While there might be no charge for the initial enquiry and assessment, charges would be payable by the customer if they went on to take out an IVA, which was the likely outcome. As there was no mention of fees at all in the ASA concluded that the references to “Free” in the ads were misleading (National Direct Service t/a Step Debt Support, 27 January 2021).

 

The ASA investigated ads that appeared on social media and if the ads made clear of the risks that were associated with an IVA. The ASA considered that consumers should be made aware of the risks associated with an IVA before they make an enquiry, and so in the absence of this information the ads were found to be misleading (Ashteck Media Ltd t/a Ashteck Media, 2 June 2021).

 

  • Make clear nature of business

advertising rules make clear that marketing communications must not falsely claim or imply that the marketer is acting for purposes outside its trade, business craft or profession and that they must make clear their commercial intent, if that is not obvious from the context. If an ad is principally for lead generating companies that provide consumers’ contact details to other companies, rather than providing the service themselves, then it is likely that the marketers will be considered as breaching the Code for falsely implying that they are acting for purposes outside their profession.

 

The ASA investigated numerous claims in ads for an advertiser in 2021. The ASA challenged if it was clear in the ads that the service was not provided by the advertiser, and that they would actually pass a consumers details onto a third party. While it was acknowledged that one of the ads contained text that stated the advertiser would pass details on to an approved partner, as this text was small and faint in comparison to the claims within the ad, it considered that this was not sufficiently clear and so was considered misleading (Fidelitas Group Ltd, 27 January 2021).

 

Another ad featured claims “One of my friends just got 81 percent of his debt wiped off … So swipe up, and you can wipe off a big, big chunk of your debt”, and “…WRITE OFF 85% OF THE DEBT! … SWIPE UP NOW” and contained no information regarding the fact that the consumers details would be passed on to third-party insolvency practitioners. The considered that the ads should make clear they were a lead-generating company as this was not clear from the presentation of the ads, and so they were misleading (Ashteck Media Ltd t/a Ashteck Media, 2 June 2021).

 

Source: CAP

 

Note: This advice is given by the CAP Executive about non-broadcast advertising. It does not constitute legal advice. It does not bind CAP, CAP advisory panels or the ASA. CAP’s Advice Online entries provide guidance on interpreting the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing.

 

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