Financial promotions

When a person or firm publishes or communicates an advertisement (financial promotion) designed to persuade a customer to take out a mortgage, that advertisement must comply with rules laid down by the Financial Services Authority (FSA). The rules can be found in the FSA's handbook, in the conduct of business (COB) and mortgages: conduct of business (MCOB) sourcebooks. The rules relating specifically to financial promotions for mortgages are set out in MCOB 3, which you can see here.

The purpose of the rules is to make sure that financial promotions are clear, fair and not misleading and that firms pay due regard to the interests and needs of consumers. Any person or firm who communicates a financial promotion must either be authorised by the FSA or must have had the content of the promotion approved by someone who is authorised. 

The FSA's website also contains information about the common themes which it has been finding in relation to financial promotions. 

The FSA has published a series of bulletins on financial promotions. The latest bulletin is dated 5 April 2007 and included information on the following:

• Home reversion plans - the FSA reviewed a sample of financial promotions for home reversion plans prior to 6 April 2007 (the date on which FSA started to regulate the sale of such plans). It found the quality of promotions issued by firms which are already authorised for other regulated activities were much better than those of firms which were still unauthorised when the review was carried out.
• Sub-prime mortgages - the FSA has focused on financial promotions for sub-prime mortgages over the past year and has told more than 200 firms to withdraw or amend misleading promotional material. Some firms were visited and have now been referred to the FSA's enforcement division.
• Information about arrangement fees - the bulletin emphasises the need for promotions for fixed and discount rate mortgages to be very clear where arrangement fees are charged.
• Stepped-rate mortgages - where a financial promotion describes a low initial rate in a stepped-rate mortgage, it should -
  • give no less prominence to the disadvantages, such as early repayment charges and arrangement fees;
  • clearly describe an annual percentage charge rate (APR), which is the overall cost of the mortgage, including any arrangement fees and difference interest rates charged .
  • avoid any misleading headline claims about the nature of the rate being offered.