Financial watchdog cracks down on ‘finfluencers’ and TikTok money adverts
17 July 2023, 17:04
Often unauthorised ‘finfluencers’ have little knowledge about what they are promoting, the Financial Conduct Authority said.
The UK’s financial watchdog is clamping down on social media “finfluencers” and adverts like crypto “memes” on platforms such as Instagram or TikTok which could be harming consumers.
Often unauthorised influencers promoting financial products and services have little knowledge about what they are promoting, the Financial Conduct Authority (FCA) said.
It plans to modernise guidance to include more recent social media-based adverts like buy-now-pay-later schemes and cryptocurrencies.
The social media landscape has evolved and YouTubers and streamers have become a major source of financial promotions, as well new platforms like Instagram’s Threads.
Previous guidance centred around character-limited media like Twitter, the regulator said.
The FCA said consumers using social media to inform their financial decision-making are likely to encounter promotions that are unfair, unclear or misleading, and therefore likely to cause harm.
Lucy Castledine, director of consumer investments at the FCA, said: “We’ve seen a growing number of ads falling short of the guidance we have in place to stop consumer harm.
Too many people across the UK are being shown financial promotions from unsuitable sources.
We’ll be ramping up our work to stamp out illegal financial promotions, particularly those found on social media. #financialpromotions #financialservices https://t.co/sK8r5ExxVm
— Financial Conduct Authority (@TheFCA) July 17, 2023
“We want people to stay on the right side of our rules, so we’re updating our guidance to clarify what we expect of firms when marketing financial products online.
“And for those touting products illegally, we will be taking action against you.”
About 61% of 18 to 29-year-olds follow social media financial influencers, and nearly three-quarters say they trust their advice, according to a report by MRM and Mouthy Money.
Some 90% of young people have therefore been encouraged to change their financial behaviour, the report revealed.
Many adverts are either illegal or do not comply with the FCA’s rules, meaning consumers are likely to see poor quality information on social media, it said.
The regulator identified examples of misleading or unclear adverts which do not adequately show consumers the potential risks of a financial product, such as people using TikTok to promote debt counselling, or a buy-now-pay-later Instagram advert which does not outline the relevant risks of using unregulated credit.
The use of memes in adverts, particularly in the crypto sector, have circulated on social media, with users often not realising they are subject to the FCA’s rules, the regulator said.
From October 8, the watchdog is banning incentives to invest in crypto, such as “refer a friend” bonuses, and forcing firms to introduce clear risk warnings on adverts.
And under the new consumer duty rules, which come into force at the end of this month, financial services firms will have to make their social media promotions fairer and clearer for consumers.
