Office of Fair Trading
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OFT issues guidance on misleading trading names
The OFT has recently issued guidance misleading or otherwise undesirable trading names to businesses offering credit services or products.
Among other practices, the guidance 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'.
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.
Similarly, 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
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, Director of Consumer Credit, OFT 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.'
See the Misleading or Otherwise Undesirable Names guidance (pdf 264kb).
Where an applicant insists on seeking or retaining a name that the OFT considers to be misleading or otherwise undesirable, appropriate regulatory action is likely to be taken. This will usually take the form of the issue of a Minded to Grant in Different Terms Notice, in accordance with section 27 of the Consumer Credit Act. If a name has been granted which subsequently proves to be misleading or otherwise undesirable, the issue of a Minded to Compulsorily Vary Notice is likely. If a business trades with a misleading name not included in the licence, the OFT or Local Authority Trading Standards Service may instigate criminal proceedings under section 39(2) of the Act.