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Out-Law News 1 min. read

FCA warns currency transfer firms over 'misleading' marketing


Firms that offer currency transfer services should review their marketing material to ensure compliance with regulatory requirements and consumer protection legislation, the Financial Conduct Authority (FCA) has warned.

An email to all relevant firms from Karina McTeague, the FCA's director of retail banking supervision, particularly cautioned against "misleading" use of the interbank rate in currency converter tools and claims consumers can make "specified savings and achieve better rates". The email reminds firms they need to comply with the 2008 Consumer Protection from Unfair Trading Regulations (CPRs) and, as applicable, the FCA's own financial promotion rules.

Financial Regulation expert David Heffron of Pinsent Masons, the law firm behind Out-law.com said “The FCA is always looking out for misleading marketing materials.  It is also possible to complain to the FCA about promotions or adverts that are potentially unclear, unfair or misleading.”

"Firms that are new to supervision by the FCA will quickly learn that any perceived misleading statements made in advertisements will certainly be examined by the FCA and, if needs be, acted upon. Generally this means removal of the material concerned but can lead to enforcement action if the firm does not cooperate. So, firms must put all proposed marketing materials through a full review and approval process before considering publication," he said.

The email reminded firms of their responsibilities under the CPRs, which ban misleading actions or misleading omissions as part of its general prohibition of unfair commercial practices. Firms may also be covered by the 1992 Price Indications (Bureaux de Change) (No 2) Regulations if they give exchange rate indications in the course of indicating their willingness to buy from or sell foreign currency to consumers in exchange for sterling.

Banks conducting currency transfer business must also comply with the rules on financial promotions in the FCA's Banking: Conduct of Business sourcebook. Firms must make sure their marketing complies with the requirements of other regulators including the Advertising Standards Authority, the FCA said.

The FCA said that it had "concerns" that some firms’ marketing was potentially misleading as it may give consumers the impression that rates based on the interbank rate were available to them, rather than the "materially inferior" rate that they may actually receive. It is also concerned about firms claiming that consumers can "make specified savings and achieve better rates by using their services, rather than those of their competitors", and reminded payment institutions not to state or imply they have the "approval or endorsement" of the FCA rather than merely making factual statements about their regulatory status, according to the email.

Firms that are "not acting in accordance with [the FCA's] expectations" may be subject to supervisory or enforcement action, the FCA said.

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