Advertising restrictions for consumer loans
From the 1st of January 2016 onwards, credit institutions must review their communication strategy. Loan advertisements will be subject to stricter regulations and hard advertising will be controlled.
This amendment began with Josiane Aubert (Social Democratic Party/Vaud) who filed a parliamentary initiative in 2010 aiming at prohibiting advertising for small loans. In 2014, the National Council and the Council of States approved this initiative, however allowed the sector to regulate itself.
After this amendment, the Swiss bankers’ association ASBCEF drew up a self-regulation agreement. This agreement provides rules governing the principles of advertising for consumer loans, applicable to the association’s member institutions.
The major changes are as follows:
Contents of the self-regulation agreement
Advertising can no longer imply that consumer loans can be granted quickly. Startling slogans are therefore cast aside, for example: « Express Loan« , « Approved in 30 minutes« , « money received in under 4 hours« .
Publicity must not lead anyone to believe that the institution is minimising the consumer analysis phase. This means removing announcements such as « You decide your monthly repayment amount, whatever your income« .
Loans for short-term leisure activities
Adverts for expensive, short-term leisure activity loans, for example for holidays, weddings or birthdays will also be banned.
Moreover, advertising can no longer use arguments that are unwise from an economic perspective, for example using a loan to repay a tax debt.
The use of sales methods that may shock or that are ambiguous is now prohibited, such as the distribution of loan application coupons in public thoroughfares, and brochures with images resembling bank notes.
Young adults (under the age of 25) will also benefit from better protection: they can no longer be targeted by consumer loan adverts. This entails the banning of both arguments and advertising locations: games rooms can no longer display consumer loan advertisements.
Sanctions for non-compliance with these regulations
Any institution that does not abide by these new regulations may incur a fine equal to 100,000 CHF. Moreover, the agreement broadens the field of application to incorporate partners working with the member institutions. The institutions adhering to the agreement are required, where applicable, to end cooperation with any partners, such as brokers, who are in breach of this agreement.
The examination of the loan applicant
This new measure complements the other provisions of the revised consumer credit legislation. The lending institution will be able to oblige the consumer to produce an extract of the debt collection register in addition to proof of income. If in doubt, the lending institution may request further documents to check the accuracy of the customer’s information.
The aim is therefore to protect customers from unscrupulous institutions, as well as to protect the customers from themselves, by checking their solvency and their financial soundness beforehand.