Financial Compensation ads – referencing fees and taxes
15 December 2016
Our Compliance team is giving notice to Claims Management Companies (CMCs) that the outcome of some ongoing ASA investigations will have ramifications for how they advertise in future. We’ll be monitoring that the necessary changes are made to ads and following that up with sector wide enforcement action. This, alongside guidance we issued along with the Ministry of Justice’s Claims Management Regulation Unit, is all designed to ensure consumers are not being misled.
The background to all this is that there have been various issues surrounding ads for financial claims services that have prompted consumer concerns and subsequent complaints to the ASA; including CMCs not making clear charges, such as cancellation fees or commission on successful claims.
In addition, questions have arisen around communicating the application of taxes on compensation figures and whether it’s clear the amounts being quoted are gross or net of charges. Where the ASA has investigated it has found that, where an ad quoted average compensation figures, the amount was a gross figure and the actual amount received by clients was less because the settlements were subject to fees and taxes. Because this is material information consumers need in order to make an informed decision about a financial claims service this approach has been found to be misleading.
In summary, we’re advising CMCs to consider the following best practice when preparing their ads:
- If a quoted figure is obviously identifiable as a gross figure, ads should make clear whether charges apply, and how they will be calculated. They should also include reference to taxes.
- If a quoted figure obviously takes into account a company’s charges, it is unlikely that consumers will be misled if this is not further disclaimed in the ad. Reference to taxes will, however, still be necessary in order to not mislead consumers.
Although ambiguity should be avoided, it sometimes may not be immediately clear from the context whether or not a quoted figure is gross or net of charges. Complaints about such ads will likely be subject to close scrutiny by the ASA; ordinarily through a formal investigation.
The outcome of the ASA’s investigations is expected to aid CMCs’ understanding on how to clearly communicate fees and taxes.
Following the above best practice advice will minimise the risk that you will have to change your advertising. Our Compliance team will update the industry on the impact these new rulings will have on CMCs’ advertising in the New Year.