The Office of Fair Trading (OFT) has issued guidance on misleading trading names.
The is designed to stop businesses from misleading consumers about their commercial status by using names such as ‘Helpline’or ‘Debtline’, or any name that implies a business is a charity or public service such as ‘Citizens Advice Bureau’ or ‘Government’.
The OFT says that, as a general principle of fair business practice, names used by a commercial enterprise should never seek to mislead consumers looking for free, impartial, charitable or public sector assistance.
At the same time, a trading name should not give a misleading or otherwise undesirable indication of the services to be provided, the cost of the products on offer, the scale of the business, including its geographical scope and the relationship of the business to other businesses.
For example, the use of names such as ‘Cheap Loans for All’, that imply credit is available regardless of the borrower’s financial circumstances, is likely to be challenged by the OFT. Similarly, names that indicate some aspect of the cost of a service, such as ‘No Interest Loans’ or ‘Lowest UK Prices’, will only be acceptable where there is evidence that the name is an accurate description of the service or product on offer.
A name should also not imply a business has exclusive or officially sanctioned authority to offer the product in a specific locality, for example, the ‘Manchester Office of Fair Advice’, unless such authority exists and can be demonstrated.
The guidance applies to any trading name a business uses which is linked to the provision of credit or ancillary credit services. This includes on-line domain names and web-site addresses. It also covers, for example, online names used by ‘lead generators’ where they are engaged in activities for which a credit licence is required.
Businesses must notify the OFT of all trading names under which they carry out licensable activity and must satisfy the OFT that the names are not misleading or otherwise undesirable. Names that are considered to be misleading are likely to be refused on new and renewal licence applications and on application to vary a consumer credit licence.
In December 2010, the OFT refused an application from Baker Evans Limited to use the trading names ‘The Bankruptcy Helpline’ and ‘The Insolvency Helpline’. In October 2011, the OFT also stopped Money Advice Direct Limited (MADL) using its former existing trading name, ‘The UK Insolvency Helpline’ and proposed domain names including the word ‘helpline’, because they failed to make the commercial nature of the business clear to consumers.
Where a business insists on using a name considered by the OFT to be misleading or otherwise undesirable, appropriate action to prevent the name from being used is likely to be taken.
David Fisher, the OFT’s director of consumer Credit, said: “Businesses are free to choose trading names as long as they are not misleading or otherwise undesirable. For example, where they do not make clear the nature of a business or where it pretends to be something it is not.
“The name of a business can be important to consumers when choosing a supplier and they should not be misled in this regard.”
National debt charity Consumer Credit Counselling Service (CCCS) has welcomed the new guidance.
Delroy Corinaldi, its external affairs director, said: “There is a fundamental dividing line between debt charities and debt management companies. Charities see those struggling with debt as a social problem that needs to be helped with advice and support. They are not out to make a profit from someone’s debt misery. Whereas fee charging debt management companies see those struggling with debt as a market to make a profit from.
“That is why this new guidance is so important, as it will help consumers see the difference between the two and not end up wasting thousands of pounds for advice and support that they could receive free from a charity.”