Note: This advice is given by the CAP Executive about non-broadcast advertising. It does not constitute legal advice. It does not bind CAP, CAP advisory panels or the Advertising Standards Authority.
In 2007, the ASA investigated a complaint about an ad offering an Individual Voluntary Arrangement (IVA). The ad claimed “Write off up to 90% of your debts” and was based on clients whose creditors had agreed to accept a dividend of 10 pence in the pound and write off the remaining 90 pence. The ASA ruled that the ad was misleading because the advertisers had not demonstrated that a significant proportion of consumers had been able to write off 90% of their debt and, in basing their claim on a dividend of 10p in the pound, they had not taken into account the impact of fees on the amount of debt consumers would repay. The ASA also ruled that the ad should have stated that an IVA might have a significant impact on a client’s credit rating. (Buckley Stephens & Co. Ltd t/a Spectrum Financial Protection, 28 March 2007).
The ASA also investigated a complaint about a TV ad that claimed "there is a little known piece of government legislation that could write off what you can’t afford to repay … And it won’t cost you a penny". The advertisers argued that fees were paid out of arrangement funds held in trust by an Insolvency Practitioner on behalf of creditors and that, because they were the beneficiaries of the fund, the creditors bore the cost of the fees and not the debtor. The ASA considered that the money in the arrangements funds issued from the monthly repayments made by debtors, that debtors paid a larger amount than the dividend payable to creditors and that, if the IVA failed, debtors would be responsible for the balance of the debt. The ASA noted that, in those circumstances, the sum of their repayments under the terms of the IVA would be greater than the amount of debt they had paid off. Because it considered that the claim "it won't cost you a penny" implied debtors bore no costs in an IVA beyond repayments to creditors, the ASA ruled that the ad was misleading. Although that was a broadcast investigation, non-broadcast advertisers will be interested in the ASA’s decision (Debt Free Direct Group plc, 16 May 2007).
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. 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. Marketers should not base claims solely on the dividend agreed by creditors but should calculate the amount of the initial total debt that remains after the monthly repayments made by debtors. Marketers should not state or imply that debtors will incur no costs in an IVA.
Debt management companies that hold licences under the Consumer Credit Act must adhere to the guidelines on advertising given in the OFT’s Debt management guidance. Information on the OFT’s action on IVA advertising, including examples of claims that should be avoided, is available at www.oft.gov.uk/news/press/2007/8-07.
Please note that the OFT’s guidance is separate from that of CAP but could be taken into account by the ASA when investigating complaints about IVA advertising.
Last modified : 02 August 2010