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The Australian Securities and Investments Commission (ASIC) has demonstrated to mortgage brokers which use mortgage calculators allowing borrowers to pay off their mortgage sooner without increasing their monthly payments that such representations may be misleading and action may be taken against them.
ASIC’s notice follows the Federal Court’s declaration that Whyte Corporation Pty Ltd had engaged in misleading and deceptive conduct regarding a mortgage calculator, known as the EquityExcel Plan.
The court restrained Whyte Corporation Pty Ltd from continuing to make the representation and ordered them to write to their clients explaining the terms of the court orders and advise them to notify ASIC if they considered that they had been misled and had suffered loss.
ASIC took action in November 2008 against Whyte Corporation and its director, Gavin Whyte, alleging they breached the Australian Securities and Investments Commission Act by leading borrowers to believe that the EquityExcel Plan would enable them to pay off their mortgage sooner and make substantial savings without increasing their monthly payment or making changes to their lifestyle.
ASIC alleged that this representation was misleading, or likely to mislead, as a borrower could only pay off their mortgage sooner or make substantial savings using the EquityExcel Plan if they made considerable additional payments, over and above their minimum monthly repayments.
ASIC deposit takers, credit and insurance senior executive leader Greg Kirk said this was the second action the regulator had taken in relation to this type of misleading claim.
“The only way to pay off your loan sooner is by moving to a loan with a cheaper interest rate or by making extra payments,” Kirk said.
