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Promotion commotion

Guy Anker analyses price comparison ads that have brought protests

Nationwide, Britannia and HSBC were all criticised last week for running price comparison advertisements that allegedly failed to offer an explanation for their claims.

The three all deny any wrongdoing but brokers have lined up to voice their concerns over lenders comparing deals with those offered by rivals because mortgages are so complicated and have so many different features that influence the final outcome that a comparison on suitability can be difficult.

The ads in question include an ad on Nationwide’s website home page which says its two-year fix is “just the ticket for remortgaging” as the lender claims it is £552 a year cheaper than Abbey, £443 a year cheaper than Halifax and £436 cheaper than Cheltenham & Gloucester.

But borrowers are not told on what basis those savings are made unless they click on a small link that says “more info”, scroll down the bottom of that page and read the small print that explains how the calculations have been made.

HSBC compares the APR on its two-year fix on a press ad that has since been taken down, and gives the rate and booking fee. John Charcol senior technical director Ray Boulger says further details are missing, such as loan size and flexibility.

The Britannia ad for a three-year fix, which ran for a short time in September, said it was a “best buy” but without any explanation of the basis for that claim. The phrase “best buy” is also surrounded by stars to make it seem like an award-winning mortgage, which it is not.

FSA spokesman Robin Gordon-Walker says: “We do not ban comparative adverts but you have to be careful with those sort of claims because if you leave out something like the exit fee it is not comparing like with like.”

Mortgages conduct of business rule 3.6.4 (1) (h) states: “The facts on which any comparison or contrast is made must be verified, or, alternatively, that relevant assumptions are prominently disclosed and that the comparison or contrast is presented in a fair and balanced way, which is not misleading and includes all factors which are relevant to the comparison or contrast.”

Boulger says: “Looking at the rules, I believe that the Nationwide ad is non-compliant as you cannot leave important information in the small print. The HSBC ad does not include all factors as there is nothing about flexibility and over-payments and other features. I do not like the stars around the Britannia ad as it looks like it has won an award, which is misleading.

“By excluding the features, the lender is saying they are not important but, for example, paying the fee up front or adding it to the loan can completely alter the price you pay.

“There are lots of things not pointed out in these adverts and it is virtually impossible to make an ad clear, fair and not misleading and allowing it to still be snappy when doing comparisons. I thought that, after regulation, comparison ads would disappear.”

Question marks over financial promotions have been a hot topic for the FSA since it began regulating the mortgage market on October 31, 2004.

In August, the FSA revealed that 59 per cent of the complaints it has received about promotions on a hotline are related to mortgage ads, although it says overall standards in financial services are improving.

Among lenders, it found that there were improvements but too many promotions contained a large amount of small print, inadequate balance of risks and benefits, confusing illustrations of different rates charged to consumers at different stages of a mortgage, and some potentially unfair or unsupportable claims.

Mortgageforce managing director Rob Clifford says: “I think there is a clear risk of consumer detriment, in that there are many factors that can affect the appropriateness of the product, and the headline rate is not enough.

“Nationwide will often have a lower standard variable rate but clearing banks may say they are better with lower fees. Consumers refer to brokers for proper comparisons and needs analysis and these ads should not wonder into that space.”

One ad that did not come in for criticism was Woolwich’s lifetime tracker mortgage press ad that describes itself as the “best” available. One reason is that many brokers do consider it to be the best but also there is an explanation at the bottom of the page, which includes the minimum loan size, although it is in small print.

But Woolwich did come in for criticism earlier this year and had to withdraw a TV and website ad for the tracker loan that claimed it stayed low for the life of the mortgage, even though it is variable.

A complaint against Alliance & Leicester was upheld by the Advertising Standards Authority in June after criticism along similar lines.

Nationwide spokeswoman Tamsin Hemsley says: “We pride ourselves on our transparency to customers and make sure our advertising is compliant and we have adhered to FSA guidelines. We feel the comparison we are using is fair in this case, although as C&G is slashing its fees in October, we will be changing the comparison to one with Woolwich.”

HSBC spokeswoman Katherine Kowalski says: “We are only obliged to

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