Reform of Principles and Rules for Advertising Financial Products and Services

Due to the importance that Advertising assumes in building the reputation and opinion of the public regarding products and services offered for sale, the Bank of Portugal has been regulating the advertising of financial products and services since 2008. Faced with the digitalization of the market (and advertising), the Bank felt the need to revisit its internal regulations, also reflecting its experience as a supervisory body. Entirely restructuring Notice nº. 10/2008, the Bank leaves behind a product specific regulation, abetted by general statute-inspired principles, and replaces it with a horizontal regulation broadening the scope of services included and grouping them alongside products in categories, or “types of advertising.” 

KEY FEATURES OF NOTICE Nº. 5/2024:

The Notice begins by densifying the general principles applicable to Advertising by credit, financial, payment and electronic money institutions, and by entities qualified to carry out the activity of credit intermediation (Chapter I), such as truthfulness, transparency and balance. 

Regarding balance, interestingly, the Bank of Portugal creates an obligation for those entities to highlight, in their ads, the information that must be made available to the costumer under the terms of the Notice at least as much as any information regarding product/service characteristics or benefits, through the use of appropriate color schemes and illustrations. 

The Bank then establishes 3 types of Regulated Advertising, each subject to their own set of rules. The norms contained in the Section Advertising of financial products and services (Chapter II) apply to the financial products and services provided for in Decree-Law nº. 74-A/2017, of June 23^rd. It determines these ads must include: access conditions and any restrictions to access or to the benefits announced, as well as state the nature and purpose of the product/service, the expiration date for the offer of the product/service under the conditions advertised, the duration of the obligations assumed under the contracting of any product or service, and, lastly, all costs associated with the product or service. 

Additionally, the Notice limits the use of certain expressions (such as “Zero Interest”; “free”; “offer”; “refund”) to very specific circumstances, and regulates, specifically, the following financial products: Housing Loans; Personal (Consumer) Loans, Company Loans, Deposits, Structured Deposits, and Package accounts. 

Activity advertising (Chapter III), in turn, refers to advertising an institution’s own economic activity (their products or services), beyond the scope of Decree-Law nº. 74-A/2017, of June 23^rd, and requires observing the requirements set forth in that section. Again, the Notice limits the use of certain expressions ( “offer” and the “lowest price in the market”, as well as similar expressions) to very specific circumstances, and determines that certain other expressions (such as “experts at credit”; “credit solutions for you”; “special financing conditions”) may only be used alongside explicit mentioning of the type of intermediation activity performed by the advertiser. 

Thirdly, Institutional advertising corresponds to the residual type (all advertising undertook by credit institutions when not related with their economic activity). It is regulated in Chapter IV, which prohibits the use of the expressions “offer” and the “lowest price in the market”, as well as similar expressions.

Lastly, the Notice proceeds with the creation of two additional obligations for credit entities intending to engage in advertising: the Imposition of Obligations to Report Advertising Media to the Bank of Portugal (in Chapter V), and Imposition of Minimum Character Size and Spacing Requirements in Advertising Communications (in the Annex to the Notice, establishing rules on the minimum font size to be used in different means of dissemination, as well as criteria for assessing the requirement for similar highlighting of information and characteristics of the products, services or other subject matters, in order to promote transparency and balance).

TAKEAWAYS:

A self-evident takeaway is that the Bank of Portugal was thorough, as well as detailed in the conducts it imposes and prohibits. Needless to repeat the changes in full, the Notice exudes attention to market practices and pragmatism. Simultaneously, the effort to illustrate the terms and conditions of the products and services and bring their language closer to the understanding of the general public is praiseworthy, as is the limitation to the usage of phrases and expressions that are commonly used and often misguiding. 

One concern, however, is that overly specific requirements open the door to circumvention. Ascribing mandatory font sizes in accordance with varying advertising supports calls for the invention of new supports that escape legal definitions. 

The Notice is set to apply from January 1^st, 2025 – further assessment should be delayed accordingly.