What exactly is “representative variable APR at 18.9 per cent”? Brussels has moved to ban the garbled Terms and Conditions warnings squeezed in at the end of credit card adverts – but UK radio stations fear the extended commercials required are driving away listeners.
Radiocentre, the industry body for commercial radio, agrees that the high-speed voiceovers wedged in to the end of financial advertisements, tossing out a blizzard of interest rates and fee charges, only serves to baffle listeners.
Just 4 per cent of people could recall any of the numbers moments after listening to one of these adverts, according to consumer research commissioned by Radiocentre.
The Consumer Credit Directive, introduced by the European Commission, and adopted into UK law, was designed to help consumers by ensuring that a basic level of information is included in any advert for credit card agreements.
The Directive requires any advert indicating an interest rate or figures relating to the cost of the credit to the consumer, to relay those figures in a “clear, concise and prominent way.” An illustrative representative example of the credit cost, eg £200 at a particular Annual Percentage Rate, should now be included in the advert.
However Radiocentre believes the elongated warnings, eating up to a third of a 30-second advert, are too cumbersome and intrusive. The Ts & Cs can now be longer than the original advert. Some advertisers which might have run a swift 10-second spot are refusing to buy the 30-seconds of airtime now needed to include the full conditions.
Radiocentre estimates that the cost to the UK industry from advertisers deterred from buying airtime for fear of alienating listeners with “unhelpful” advice is around £120m a year.
Listeners could instead be given a brisk warning and then directed to a website for a detailed exposition of the financial consequences, Radiocentre argues.
The body has sent an appeal to the Commission, requesting a special exemption for radio advertising from the directive, which impacts upon banking, insurance, car and retail messages.
The garbled warnings are the “most hated” element of radio advertising, said Siobhan Kenny, Radiocentre chief executive. “They don’t help consumers because nobody listens to that stuff,” she said. “They are baffled by lengthy terms and conditions at the end of credit ads. The next thing is they just switch off the radio altogether.”
Radiocentre research found that the punchy statement, “borrowing money costs money”, employed at the conclusion of adverts as an alternative, enjoyed a 70 per cent spontaneous recall and conveyed a message listeners understood.
Directing listeners to a website address “for more information” could also be an effective alternative. “When consumers make decisions on financial products they like to research the facts and figures online rather than listen to them,” Ms Kenny said. “There are lots of Ts & Cs for print adverts and nobody reads them. But you can’t avoid them on radio because they are read out in real time. They are uniquely intrusive.”
Ms Kenny is hopeful of a sympathetic hearing in Brussels after persuading the Commission to give radio an exemption from an energy labelling directive that would have resulted in similar warnings on all adverts for white goods.
“Adverts would have had to state how many kWh every fridge used,” Ms Kenny said. “We’re not asking them to open up the whole Consumer Credit Directive, whose aims to better inform listeners we support, just to carve out an exemption for radio.”
Credit card jargon
APR - Annual Percentage Rate - includes both the cost of the borrowing and any associated fees. It should show the amount to be paid each year over the term of the debt.
A Platinum 37 Barclaycard offers 0 per cent interest on balance transfers for 37 months from account opening. But a 2.45 per cent fee applies.
“A fee of 3.5 per cent will be applied to your account at first, but you'll only pay 2.45 per cent as we'll refund the difference.” – terms and conditions apply.
An illustrative example states - Representative APR 18.9 per cent (variable), Purchase rate p.a. 18.9 per cent p.a. (variable), Assumed credit limit - £1,200
American Express Platinum Cashback Credit Card
Balance transfers - 22.9 per cent p.a. variable with a 3 per cent fee
Purchases - 22.9 per cent p.a. variable
Representative APR (variable) - 28.2 per cent APR
Representative Example: The standard interest rate on purchases is 22.9 per cent p.a. (variable), so if you borrow £1,200 the Representative APR will be 28.2 per cent APR (variable). £25 annual fee.
