Financial services sector unimpressed by proposals on advertising standards

MEDIA & MARKETING:The industry is unhappy with the Central Bank's 'overperscriptive' draft code on product adverts

INTENDED NEW regulations from the Central Bank of Ireland to govern how financial institutions can advertise their products have been criticised as unworkable by banks, building societies and insurance companies.

About 30 per cent of the space of allocated to a financial product advertisement on radio or in the printed press is compliance wording.

The new rules will mean longer broadcast adverts and bigger press adverts, adding further cost to the advertiser.

The industry says the revised compliance requirements will mean that specific products will not be able to be advertised on radio at all.

Stung by criticism that they were asleep at the wheel as the Irish banks went into meltdown, the industry argues the Central Bank is now going too far the other way, with plans to suffocate financial providers with bureaucratic red tape.

The regulator’s proposed new advertising code includes a raft of rules that stipulate the prominence of financial health warnings.

The warnings must not be obscured or disguised in any way by the content, design or format of the advertisement, and all advertisements will have to state clearly any qualifying criteria of a product or service.

These warnings will not be allowed to be put in small print if they relate directly to the product. Small print or footnotes will only be allowed to supplement or elaborate on the key information in the main body of the advertisement and they must be of sufficient size and prominence to be clearly legible.

The Irish Banking Federation says the proposed code will make it “very difficult to advertise effectively at a time when advertising will be even more essential in a smaller market”.

In the federation’s view, the current position where warning boxes sit in advertisements is sufficiently clear and transparent to the consumer.

The federation argues that the proposed rules would hamper effective web-based banner advertising as the regulatory disclosure would take up the majority of the banner.

“Where a lot of detailed information is contained in an advertisement and all information is given equal prominence, there is a real danger that consumers will be unable to absorb all the information or the key information in it.”

Richard Carr, director of advertising agency Rothco, whose client is AIB, agrees.

“The real danger is that consumers will switch off when confronted with a wall of text,” says Carr.

Insurer One Direct disagrees with the proposal that financial product advertisements must state clearly any qualifying criteria for a product or service.

“This proposal is not practical as there may be a number of qualifying criteria attached to the product or service,” says the company.

“The advertisement is designed to generate interest from consumers in relation the particular product or service.

“The sales process will cover all the key information disclosure so there should be no additional requirements on advertisements.”

The Irish Insurance Federation has told the Central Bank that marketing literature for insurance products already contains “an extraordinary degree of consumer protection”.

“Aesthetically this will look displeasing and will reduce both effect of, and customer interest in, advertisements,” says insurer Aviva. Also weighing in is Sundeep Takwani, director of regulation for the Association of Chartered Certified Accountants.

“The draft code is generally overprescriptive. We would urge the Central Bank to redraft the code to make it more principles based, thereby making it easier to understand and engage with.”

Ed McDonald, chief executive of the Association of Advertisers in Ireland says: “The new Central Bank code poses very practical issues and implementation problems which presumably were not considered in designing the code . . . and that is seeking to find a reasonable balance.”

Central Bank press officer Nicola Faulkner counters: “In light of recent events, a review of the code is timely. There have been two industry consultations on the proposed update. No more consultations on this specific code update are expected.

“None of the financial institutions will be aware of any recommendations we have taken on board from them until the final code is published. The final code will be assessed by the consumer protection team and signed off by the Central Bank board.”

The Central Bank plans to finalise its new Consumer Protection Code by the end of this year. Once implemented, it will provide for a range of penalties, including fines of up to €10 million for any company found to be in breach.