A compliant was raised by Crystal Home Improvements with the United Kingdom’s Advertising Standards Authority (ASA) regarding a brochure, entitled “Green Deal Payment Plans The Facts”, which could be downloaded from the website http://www.tgdfc.org, promoted Green Deal loans.
The complaint was raised that document promoted the Green Deal in the following way:
- “Green Deal payment plans are typically the cheapest on the market for medium sized loans, given reasonable expectations for increases in interest rates over the long term” on the Cover Page was misleading and could be substantiated; and
2. “We provide peace of mind by only lending if the government’s Golden Rule is met. This states that the expected financial saving should be equal to or greater than the costs attached to the energy bill” and “Guided by the Golden Rule which gives householders a way of assessing expected financial savings” on Page 3 onwards were misleading.
3. They also challenged whether the page entitled “Is it cheaper to take out a personal loan to fund green home improvements?” on Page 7 was misleading, because it did not set out the additional costs that applied to Green Deal payment plans such as arrangement and assessment fees, and exit penalties.
The outcome of the adjudication assessment is described below linked to the original complainant’s issues:
1. Upheld
The ASA noted that the claim stated “Green Deal payment plans are typically the cheapest on the market for medium sized loans, given reasonable expectations for increases in interest rates over the long term” and that the claim had been directly taken from the Capital Economics report. Although, they noted that the cover did not include any additional explanatory text, it acknowledged that page four of the brochure explained that Green Deal Finance Company defined a medium sized loan as one for £1,500, and that footnote text on that page stated “Capital Economics ‘Assumes that base rates average 3% between 2015 and 2040′”. Therefore, whilst that information could have been given greater prominence, the ASA considered that most consumers reading the brochure would understand that the claim related to loans of £1,500 and would be aware of the “reasonable expectations” informing the claim. In addition, whilst the ASA acknowledged that the claim said Green Deal loans were “typically” the cheapest on the market, they considered most consumers would understand it to mean that in a significant majority of cases, a Green Deal loan would be the cheapest way to borrow £1,500.
They noted that the claim stated that Green Deal loans were the “cheapest on the market”, and whilst there was no further qualification on the cover setting out the comparator products, text inside the brochure referred to other forms of credit, including credit cards, personal loans and mortgage backed loans. In particular, we noted the brochure included the claim “Unsecured personal loans tend not to be available for long term lending of more than five years, resulting in high monthly repayments”, and a page dedicated to personal loans entitled “Is it cheaper to take out a personal loan to fund green home improvements?”. Therefore, whilst they acknowledged that the brochure made it clear that Green Deal payment plans were offered over a long term, we considered that consumers reading the brochure would believe that the comparison extended to alternative sources of credit with shorter terms, and therefore that Green Deal loans, available for terms of ten years and above, would be cheaper than loans with terms of five years and less, including personal loans.
The ASA acknowledged that APRs were a tool designed to help consumers understand the potential cost of credit, particularly when comparing different products offering the same loan amount over the same period. It accepted that the evidence provided showed that Green Deal loans had a lower APR than most of the products selected when the loan term was the same length. They had concerns, however, that the APR comparison provided a misleading impression of the costs of the different sources of credit because the products being compared did not have the same loan term. The report demonstrated that, if a consumer opted to borrow £1,500 using a credit card or a personal loan over a term of five years or less, as opposed to a Green Deal for ten years or more, whilst the APR and monthly repayments would be higher, the total cost of borrowing could be significantly lower. The ASA considered that to be material information that consumers required to make an informed decision regarding the credit option that was right for them. Because the ad did not include information to that effect, and instead implied that Green Deal loans over a term of ten years or more were cheaper than alternative loan products with terms of five years or less, they concluded that the claim was misleading.
On that point, the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.7 (Substantiation), 3.9 and 3.10 (Qualification), 3.11 (Exaggeration) and 3.38 (Other comparisons).
2. Upheld
The ASA understood that the Regulations ensured that Providers could only offer a Plan to consumers if the estimated savings that the home improvements were likely to achieve in the first year did not exceed the cost of the Plan in the first year. It understood, however, that calculations regarding estimated savings were based on a typical household’s energy usage, and while variance in energy costs were factored into those calculations, the actual savings that a consumer was likely to achieve would depend on their energy usage and the future cost of energy. If a family decreased their energy usage or the cost of energy decreased during the lifetime of the loan, the cost of the loan could be greater than the savings achieved. Therefore, the ASA understood that even if a Green Deal Provider followed the “Golden Rule” and offered a loan in accordance with the Regulations, there was no guarantee that a consumer would save money as a result of taking out a Plan.
The ASA noted that both claims referred to the expected financial savings that a consumer would make as a result of taking out a Green Deal Plan, and that neither stated that those savings were guaranteed. They noted, however, that the first claim stated “We provide peace of mind by only lending if the government’s Golden Rule is met” and considered that the reference to “peace of mind” would lead consumers to believe that taking out a Green Deal Plan was risk free and because the “Golden Rule” would be met, the “expected financial savings” were very likely to be realised. Therefore, in the absence of any text to explain that even if the Golden Rule was met there was no guarantee that savings would be achieved, the ASA concluded that the claims were misleading.
On that point, the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.9 and 3.10 (Qualification).
3. Upheld
The ASA noted that on a different page the brochure included a table headed “Example APRs of payment plans offered by the GDFC” which provided information relating to the amount consumers could borrow, over what period of time, the APR, monthly cost, total cost, and the total charge for credit, and understood that those figures included all costs with the exception of assessment and exit fees. The ASA understood that Green Deal Finance Company did not believe that they needed to include those fees as they we would not be relevant to all consumers, but that in the last page of the brochure, entitled “Important things to consider when taking out a Green Deal payment plan”, included text stating “You have a right to repay the credit agreement early, in full or in part … If your payment plan exceeds £8,000, or if the payment plan is longer than 15 years, we have limited our maximum charge for early redemption to £6 per £1,000 per year outstanding”.
The ASA considered that, as most consumers would read the brochure in its entirety, and would be inclined to read the page entitled “Important things to consider…”, most readers would be aware that exit fees applied in some circumstances if a consumer chose to leave their Plan early.
The ASA understood that assessments were self-standing products and so not all consumers who sought one would intend to, or go on to, apply for a Green Deal Plan. They noted, however, that all consumers who wished to take out a Green Deal loan needed to have a Green Deal assessment prior to doing so, and that some providers charged for that service. They, also, noted that the overall theme of the leaflet was to explain what Green Deal Payment Plans were and to emphasise how reasonable Green Deal loans were in relation to other sources of finance for home improvements. The ASA considered that Green Deal Finance Company should have made clear in the brochure that further costs in the form of an upfront assessment fee, which would not be covered by their Plan, might apply for some consumers. Because that information was not included, the ASA concluded that the ad was misleading.
On that point, the ad breached CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising), 3.9 and 3.10 (Qualification).
Action
The ad must not appear again in the same form. The ASA told the Green Deal Finance Company Ltd to ensure they held sufficient evidence to substantiate their claims, that they did not omit material information from their ads, and to make sure their claims were appropriately qualified in future.
A full copy of the ASA’s assessment can be found at http://bit.ly/XqdpEo