The question of Representative Examples

## The question of Representative Examples**I was asked yesterday why we only have one Representative Example in our plugins when other people use two. I thought it worth sharing my reply and interpretation.**The relevant rules that direct the use of Representative Examples are found in the Consumer Credit Directive (Effective January 1st 2013), the FCA adopted clauses from this into the Conc that covers advertising (they had little choice given its an Act of Parliament)**The relevant clauses that direct our thoughts are copied below***6.8 The representative example must comprise the information listed in regulation 5(1) – the “standard information” – and must be accompanied by the words “representative example”. It must be representative of agreements to which the representative APR applies and which are expected to result from the advertisement. This is not limited to agreements featured in the advertisement if the advertiser expects other agreements (e.g. with different rates or amounts) to be entered into as a result of the advertisement, whether with the advertiser or a third party.6.9 In effect, this is a two-stage process. First, the advertiser must determine what agreements he reasonably expects to be entered into as a result of the advertisement. Each such agreement will have an APR and the 51% test in regulation 1(2) is used to determine the representative APR. This produces a class of agreements – referred to here as ‘Relevant Agreements’ – which are expected to be entered into as a result of the advertisement and to which the representative APR applies. 6.10 Second, the advertiser must determine, again based on reasonable expectations, which of the Relevant Agreements is representative for the purposes of regulation 5(2). ‘Representative’ here means typical or characteristic of the Relevant Agreements. There is no 51% test to be applied, but the advertiser should ensure that the terms advertised (or better terms) would apply to enough business generated by the advertisement to make it truly representative of the Relevant Agreements. An example is unlikely to be representative if, for example, most borrowers entering into Relevant Agreements are likely to do so for a lower amount of credit or with higher charges than those stated. 6.11 If there is more than one product which is representative of the Relevant Agreements, either may be shown as the representative example as long as in doing so this does not lead to a misleading example, contrary to the CPRs.6.12 The representative example must be more prominent than any other cost information and any APR trigger. Other examples may also be included, but must be less prominent than the overall representative example. The same applies to any other cost information such as the TCC per £100. The prominence rule does not however apply to non-cost information. *The idea of the representative example is for customers to ascertain affordability in the round. A 51% APR test must be in operation, with 2 offers on one advert unless the APR's are identical only 1 can realistically meet the test, this is the first indicator of one example. The second is identifying the relevant agreement that is representative, 6.10 does not say every agreement is relevant, its asks you to identify the relevant ones. However 6.11 is the key clause, If there is more than one product which is representative of the Relevant Agreements, either may be shown as the representative example, it also goes on to say other examples may be shown but must be less prominent than the overall credit agreement.When two agreements are shown, only one may be representative under the rules, nowhere does it say every agreement should be representative or there should be more than one, the CCD points in many areas to the representative example being singular.This is the key point of a Representative Example, if every quote on an advert was an example it would surely remove the need for an example? No, the whole point of the Representative Example is to give the customer the means to review what the majority of customers can reasonably expect to obtain if they reply to an advert, this should be in one place, ideally located in a box and crucially meet the prominence rule, but the prominence rule or the lack of adherence to it in many quarters is a post in its own right!

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By: Codeweavers - 27/08/15

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