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Promotions still failing

Promotions in the general insurance and sub-prime mortgage sectors are still not up to standard, says the FSA.

A report evaluated nearly 1,000 financial promotions to gauge progress over the past two years. Investment promotions which fell below standard dropped to 32 per cent from 52 per cent in 2004. Equity-release and lifetime mortgage promotions also improved.

But the FSA says it has seen only limited improvement in promotions in the sub-prime mortgage and general insurance sectors where it says firms are making no attempt to issue fair and clear promotions which are not misleading.

Common sub-prime failings included the omission of the annual percentage rate, incorrectly calculated APRs, lack of or inaccurate risk warnings, and a lack of or incorrect fee disclosure information.

In GI, the most common problems included unsubstantiated headline claims, misleading comparisons between products, scaremongering tactics and use of jargon.

FSA retail themes director Vernon Everitt says the shift from detailed rules to a more principle-based approach allows firms more flexibility but responsibility for ensuring customers are being treated fairly lies squarely with senior management.

He says: “We continue to see variations in standards across different sectors but overall we have seen improvement over the last two years. The marked reduction in advertisements presenting a high risk to consumers is particularly encouraging. But we must see further progress.”

John Charcol senior technical director Ray Boulger says: “If there was going to a criticism of promotions in any area I would expect it to be the sub-prime sector as the quality of brokers operating in this sector varies more than in the mainstream market.”

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