The ads for new debt agreements that didn't add up
22 May 2007
Consumers in dire financial straits have been misled by ads for Individual Voluntary Agreements
An increasing number of consumers with overwhelming levels of debt are turning to specialist debt advice organisations that offer protection from bankruptcy via the use of an Individual Voluntary Arrangement (IVA). Some recent ads for IVAs, however, have come under the scrutiny of the ASA for making misleading claims.
The ASA recently investigated and upheld a series of complaints about IVA ads that made misleading claims about the extent of debt reduction (The Debt People, Yourclear Ltd, Accuma Group Plc, Money Debt & Credit, W3 Debt Solutions).
How much?
The ASA ruled that claims such as “write off up to 75% of your debt” and “you could have up to 80% of your debt written off” were misleading because they were based on the amount of debt creditors would receive but did not take into account that, when fees were added, the total amount repaid by debtors would be greater than the claims implied. In some cases, even taking fees into account, a small number of debtors might still be able to write off 75% or 80% of their debt but the advertisers could not demonstrate that a significant proportion of consumers could do so, therefore the ASA concluded that the advertisements exaggerated the benefits of an IVA.
ASA action on IVA ad upheld in court
The ASA investigated one complaint by a member of the public about a TV ad for IVAs that claimed: “It won’t cost you a penny.” The ASA upheld the complaint. Read the adjudication.
The ASA’s ruling led to an application by the advertiser, Debt Free Direct Ltd, for an injunction to stop the ASA publishing the adjudication. The application was dismissed in the High Court. The judge ruled that it would require the most compelling reasons to prevent a public body such as the ASA from publishing its adjudications, which were in the public interest. He said no such reasons existed here and Debt Free Direct had not exhausted its available remedies before taking legal action: it had not requested a review by the Independent Reviewer of ASA Adjudications. Read the ASA’s press release on the court case.
Top tips to get IVA ads right
1. To avoid problems with IVA claims, marketers should ensure that claims about how much consumers might expect to write off if accepted for an IVA are based on the last 12 months for which they hold available data.
2. The lead percentage amount of debt quoted as written off in the claim should have been achieved by at least 10% of clients over that 12 month period.
3. Marketers should not base claims solely on the dividend agreed by creditors but should calculate what amount of the initial total debt remains after the monthly repayments made by debtors.
Also, the OFT has also taken some action over IVA advertising, details of which can be found at http://www.oft.gov.uk/news/press/2007/8-07. Debt management companies who hold licences under the Consumer Credit Act must also adhere to the guidelines on advertising given in the OFT’s Debt management guidance. The OFT’s guidance is separate from that of CAP, but may be taken into account by the ASA when investigating complaints about IVA advertising.
Ask Copy Advice
Your best bet for getting ads right is a call to the CAP Copy Advice team which can give you one to one advice on the likely acceptability of your ad with the CAP Code. Call a member of the team today on 020 7492 2100 to find out how they can help you. If you want to protect your reputation in this sensitive market you can’t afford not to use them.