Advertisement of financial services. Additional clarification from the FAS
As we informed earlier, on June 22, 2014, changes to Article 28 of Federal Law No.38-FZ “On advertising” (hereinafter the “Advertising Law”) dated March 13, 2006, took effect.
The advertisement of loans was added to the scope of regulation outlined in Article 28 of the Advertising Law.
According to the amended Clause 3 of the aforementioned article, if an advertisement of services related to the provision, use and repayment of a credit or loan, contains at least one condition affecting its value, such an advertisement must contain all the other conditions that determine the total cost of the loan, which is to be determined in accordance with Federal Law "On consumer credit/loans."
According to the specialists of the FAS of Russia, the following relate to the conditions which determine the total cost of a loan:
- The amount of the consumer credit/loan;
- The contract term of the consumer credit/loan;
- The repayment term of the consumer credit/loan;
- The currency in which the consumer credit/loan is granted;
- The interest rate in percent per annum, and when a variable interest rate is applied, the procedure for determining it.
Additionally, Article 28 of the Advertising Law was supplemented by Part 13, whereby advertising of the services of entities not engaged in professional activities in consumer loans in accordance with the Federal Law "On consumer credit/loan" is not allowed.
It should be noted that the amendments to Article 28 of the Advertising Law have raised many questions among the business community related to the application of the amendments.
Businesses are concerned by the fact that the introduced amendments extend their effect not only to the advertisement of the loan, but also to the advertisement of services for the provision of consumer credit.
That is why in the explanation No.AD 130890/14 dated 31.07.2014 (click here) FAS of Russia further pointed out that in accordance with Articles 807 and 819 of the Civil Code of the Russian Federation and the provisions of the Federal Law "On consumer credit/loan," services on the provision of consumer loans are not services in consumer credit and vice versa.
Accordingly, the lender under a credit agreement can only be a bank or other credit institution, and the lender under a loan agreement can include other parties.
Thus, the advertising of consumer loan services falls under the sphere of regulation of Part 13 Article 28 of the Advertising Law, while advertising of consumer credit services is not included in the scope of this provision.
For example, the advertising of a trade organization, indicating the possibility to buy goods on credit (advertisement of home appliance stores or auto shops), which is provided by a bank or other credit institution, is not an advertisement of consumer loan services.
Accordingly, such advertising is not subject to the requirements of Part 13 Article 28 of the Advertising Law.
At the same time, if a trade organization provides the opportunity to purchase items subject to conclusion of a consumer loan contract, then the advertising of such a trade organization with indication of the possibility of acquiring the goods under a loan can be placed only if the advertiser of such advertising is an entity that performs professional activities in consumer loans.
At the same time, the legal entity may:
- Be a sole advertiser;
- Act in conjunction with the trade organization in a multilateral agreement on advertising;
- Instruct the trade organization on the advertisement of their services as part of an advertising campaign of the trade organization.
Thus, the given explanation of the FAS of Russia has removed uncertainty that had previously arisen and confirmed that the current practice of selling goods on credit does not require revision or amendment and that the adopted amendments are aimed at protecting consumers from dishonest companies, including those engaged in microfinance activities.
Should any questions arise in connection with the above or if you need any additional materials, please contact Irina Akimova or Natalia Rossikhina, Moscow Office of Capital Legal Services.
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