Financial Conduct Authority Guidance Consultation on Financial Promotions on Social Media

Social media has become a vital part of firms marketing strategies allowing them to reach a mass audience at increasing speed and frequency.

Poor quality financial promotions on social media can lead to consumer harm and financial losses.

The FCA are consulting on the proposals for new social media guidance (GC23/2) that firms should use when promoting financial products or services online, to reflect the current way social media is being used to advertise financial products and services. The proposals for the new social media guidance will modernise the information firms should use when promoting financial products or services, and replace the original finalised guidance FG15/4 published in 2015.

All financial promotions should be fair, clear, and not misleading. 

The proposed amendments to the guidance are mainly targeted at unauthorised financial influencers “finfluencers” on social media promoting financial products mainly targeted at younger consumers, particularly investment and credit products, Cryptoasset, Buy No Pay Later, Debt Counselling promotions, however the guidance still applies to the credit union sector when promoting products and service.

The Introduction of Consumer Duty has strengthened the FCA’s expectations of firm’s communications of financial promotions. The FCA wants firms to consider the guidance alongside their obligations under the Duty, to help them deliver good outcomes for their customers. Where the Duty applies, firms must consider how their communications deliver good outcomes for their customers and promote consumer understanding. The FCA wish to remind firms that the new standards under Principle 12 and PRIN 2A, including the cross-cutting rules, apply to communications and financial promotions on social media. This applies whether the firm has a direct relationship with the customer or not, including where a firm approves a financial promotion.

Firms advertising using social media must consider how their marketing strategies align with acting to deliver good outcomes for retail customers. All the cross-cutting rules will be relevant to social media promotions, and firms should take into account how promotions that do not support consumer understanding may cause consumers to buy products that are unsuitable for them, leading to foreseeable harm.

The FCA, want to remind firms of the rules that are sector specific, for credit unions this being the Conduct for Business Sourcebook (COBS 4) in relation to communicating with clients, including financial promotions.

There is a focus on the prominence of promotional features in firms’ financial promotions such as: interest rate, fees, charges, relevant risk statements and other key product information (this list is not exhaustive). All firms must ensure they address the FCA’s expectations on prominence for all different products and services.

Risk warnings are media-neutral, so apply to social media as they would any other channel. The FCA expect risk warnings to be clear, prominent and without a design feature that reduces their visibility or obscures them. Risk warnings should be clear and the person viewing the promotion should not be required to click-through to access the information. For example, credit unions should make clear the consequences if an individual misses a payment or has a late payment, an example of the non-compliant and compliant promotion can be found below.

The FCA have also produced some case studies showing good and bad practice when promoting financial services.

The FCA are looking for feedback on the following questions:

Q1. Do you agree with our approach to prominence of required information in various social media settings? Please explain your answer, highlighting any other issues that would be useful to consider.

Q2. Do you have any comments on our proposed expectations under the Consumer Duty for communications on social media? Please highlight any other issues it would be useful to consider.

Q3. Do you agree with our approach to affiliate marketing? Please explain your answer, highlighting any other issues that would be useful to consider.

Q4. Do you have any comments on the use of shared social media profiles between UL and non-UK entities? Please highlight any issues that would be useful to consider.

Q5. Do you have any comments on the proposed guidance we have set out on the financial promotion perimeter? Please highlight any other issues that would be useful to consider.

Q6. Do you have any additional comments on our proposed guidance or think there are any other topics we should consider?

ABCUL’s View – ABCUL will be submitting a response based on any feedback we receive from members. It is unlikely that we will be responding to all areas of the proposed changes to the guidance. However, we are minded to highlight the following points in our response – we would appreciate any views members have, either in support or opposition to these positions.

• We strongly support the FCA’s proposed changes to support the core commitments set out in the 2023/24 business plan to reduce and prevent serious harm and set a higher standard for consumers. The requirement to ensure that not only the potential benefits are communicated but also the relevant risks associated with products are displayed clearly, especially for buy-now-pay-later products and other unregulated credit agreements.

• We acknowledge that the Guidance Consultation recognises it may be possible to signpost for more complex products and services to provide more comprehensive information, provided that the promotion remains standalone compliant.

• ABCUL wholly supports the firmer stance and requirements for influencers due to the high risk of harm posed to consumers, especially the younger demographic.

• We do have concerns as to how this will be enforced in a fast paced and ever evolving area. The Guidance Consultation states that firms who produce video content for social media platforms like Tik Tok, Instagram or Facebook must also comply with the guidance, however some of these video promotions like Instagram and Facebook stories are only available to view for 24 hours. So how can the FCA ensure that companies who look to use this “loophole” are held accountable for their actions.