The 'Great 0% Ads Scam' – when 43 months 0% isn't 43 months 0%

We're calling on the Financial Conduct Authority (FCA) to urgently address this issue when implementing their credit card study, the initial recommendations of which are released on Monday.

In proposals for the credit card market published today, the regulator says it'll "undertake further work during the course of the year" to investigate the issues raised in our report – and will "consider the case for additional rules or guidance if necessary".

It adds that "it should be obvious to firms that financial promotions for credit cards with 0% introductory periods should represent a genuine offer" and providers must "make clear, if it is the case, that the advertised period is a maximum and that shorter periods may be offered".

Here are the key findings of MSE's investigation:

• Most top lenders operate 'up to' 0% lengths. The longest 0% balance transfer cards on the market now advertise over 40 months at 0% interest. Yet most top lenders including Barclaycard, Halifax, Lloyds, Bank of Scotland, TSB, MBNA, Nuba, Tesco Bank and the AA now operate a 'rate for risk' policy, meaning many applicants will get a much shorter 0% period.

  Only a few – such as Sainsbury's Bank and Virgin Money – offer an 'if you're accepted, you get the full 0% length advertised' option.

• If it's an 'up to' 0% length, it should say 'up to' wherever it gives the headline 0% offer. Many providers' adverts do not include the fact they are 'rate for risk' where they give the headline 0% period. They leave it to the smaller print. This is not appropriate. With APRs they need to put the fact it's a 'representative APR' in large text. The FCA should force lenders to put an 'up to' in adverts and on comparison sites at the same level of prominence.

• The only way to definitely know what 0% length you'll get is to apply, but that marks your credit file. For cards operating in this way, you can only find out the length of the 0% deal you'll get by applying. That leaves a hard search on your credit file, which then has an impact on your future creditworthiness. It's a catch-22 situation. A few card firms do offer pre-application checks, but even then they rarely give a firm answer.

• Unlike representative APRs, there is no regulation on how many people must get the advertised rate. While the FCA requires that at least 51% of accepted applicants get the advertised Annual Percentage Rate (APR) on a credit card, there is no equivalent rule governing what proportion of applicants must get advertised 0% introductory offers. There is also no public data showing how this operates across different cards.

  We believe there should be a consistent minimum percentage set, preferably at 66% (the old 'typical rate' threshold before EU homogenisation) or at least at 51% to match 'representative' APRs.

• There's often no explanation of the different lengths of deals consumers will get on adverts or websites. Some providers such as MBNA and Barclaycard, even in the small print, don't tell consumers upfront what the alternatives are if they don't get the headline card offer – meaning each application is a gamble. Lenders should be made to explain the alternatives.

'We need specific regulations to ensure transparency'

MoneySavingExpert.com founder Martin Lewis said: "On the surface we've got the most competitive credit card market we've ever seen. New customer 0% deals are now commonplace, and the advertised lengths nearly double those of five years ago. Yet this has partially been achieved by lenders switching to 'rate for risk' 0% deals – taking advantage of confusion, and playing fast and loose with people's credit scores. This needs to stop.

"People rightly focus on these offers to choose their card. However, many are then rightly left angry that the deal they get isn't close to the one advertised, yet they're stuck with it.

"The FCA just relies on generic guidance to 'treat customers fairly' to govern this. That is behind the times – interest-free offers are now a core credit card lending feature – yet the world of 0% advertising is a wild west. We need specific regulations to ensure transparency, consistency and an ability to compare products. If it's an 'up to' they need to say 'up to' and that must mean at least two-thirds of their accepted applicants get the deal."

For the full results of MSE's investigation, see the Great 0% Ads Scam report.