Credit Union Australia (CUA) has agreed to maintain interest rate discounts for eligible home loan customers after concerns were raised about misleading advertisements.
The Australian Securities and Investments Commission (ASIC) investigation focused on advertisements for CUA’s 'Rate Breaker’ home loan package, which featured on television, cinemas, the CUA website and on public transport in Sydney, Brisbane and Melbourne.
The campaign highlighted a 1 per cent discount off the average standard variable interest rates advertised by the four major banks.
The regulator’s view was that the ads gave the impression that the discount applied to the life of any loan under the 'Rate Breaker Package’ banner, despite the terms and conditions of the package specifying that CUA could change the 1 per cent discount at any time and that the interest rate could not fall below a minimum rate of 3 per cent per annum.
According to the regulator, the terms and conditions either did not feature in the advertisements, or where they did feature they were not sufficiently displayed.
As at 23 July 2013, CUA had issued 2,083 Rate Break Package loans.
CUA has since entered into an enforceable undertaking as a result of the investigation, which includes requirements that the credit provider ensure that all customers who entered into the package up to 31 August 2013 will, for the duration of their loans, receive a discount of no less than 1 per cent off the average of the variable interest rates advertised by the major banks, except where it is less than 0 per cent.
CUA must also clearly highlight in its advertisements both the 3 per cent per annum minimum interest rate and its ability to change the 1 per cent discount rate, as well as notify 'Rate Breaker Package’ customers that it will honour the 1 per cent interest rate discount by 30 September 2013.
“Consumers should be able to trust the promises and information provided in the marketing of home loans,” ASIC Deputy Chairman Peter Kell said.
“ASIC expects that financial services firms will provide clear and accurate information to consumers in their advertising, and we will act when those expectations are not met.”
