If it sounds too good to be true, then it probably is. How many of us have glimpsed an advert and been lured in by something that looks like an amazing deal, only to find that, on closer inspection, there are hidden features or conditions that mean it is not nearly as attractive as it first seemed?
Regulators are always trying to ensure that ads are clear, fair and not misleading and the FSA is no different. In fact, we are increasing our resources and widening our focus in this area. We have created a financial promotions department to meet a commitment in the FSA business plan for this year.
Over the coming year, we are going to step up contact with the industry, directly with firms and their trade bodies. The aim is to explain where we stand on financial promotions and to give clarity to possible grey areas.
We want to continue to have an open dialogue, so that we can increase our understanding of how our rules on financial promotions are being interpreted and how they affect the marketing messages that financial services firms send out. As our strategy in this area develops, we will sound out the views of the industry through these channels.
Alongside our work with regulated firms, we want to develop understanding among other parties involved in the process – for example, advertising and marketing agencies – on why our rules are important for consumer protection and what they do and do not allow.
Since many of these organisations are involved in creating and supporting regulated firms' marketing campaigns, we believe this information will assist them in their work and make their advertising compliant.
We will be looking at the best ways of communicating with all interested stakeholders, including liaising with other regulatory bodies whose work overlaps with that of the FSA.
Our monitoring coverage will be extended to include television commercials, the internet and a much stronger focus on direct offer materials. In October, promotions for mortgages will come within our remit too.
We already receive a steady flow of complaints from consumers and firms through our website and we will encourage further reports from the public and firms on a hotline dedicated to complaints on financial promotions.
We will carry out more thematic work focusing on areas of high risk to the FSA's objectives – for example, on products posing greatest risk to a large number of consumers.
How will you know we are doing this? It may be through news releases or features on the FSA's website. Check the consumer pages of the website on a regular basis to see what's new, as we will be developing space on the site devoted to this.
We shall also be looking at firms' systems and controls in connection with financial promotions. We intend to work with firms in examining their processes for creating and approving financial promotions, from start to finish – from product design, identification of the target market, promotion design and compliance clearance of the financial promotion. If we identify any shortcomings we will ask firms to make adjustments.
We do take action against financial services firms that fail to meet the standards we set. For example, in the six months to December 2003 we dealt with 294 advertising-related cases among 214 firms. Of these, the financial promotions team pursued 73 cases of poor advertising, and in the majority of these we asked firms to withdraw the promotions immediately from circulation.
In five of the more serious cases, we made companies write to their customers offering them the chance to withdraw from the product without losing any money.
One thing we do not do – and have no intention of doing – is to pre-vet adverts. It is the responsibility of senior managers of firms authorised by the FSA to make sure their adverts are fair clear and not misleading and present a balanced picture of any given product.
But we hope that by working together with a wide range of stakeholders we can learn from each other, ensure that high regulatory standards are met without preventing innovation or creativity and allow firms to compete with each other in their product markets.
Nausicaa Delfas is head of financial promotions at the FSA