ASIC hooks on to bait and switch tactics
Credit providers need to be mindful of existing advertising offers before making changes to products, following recent representations by the corporate regulator over bait advertising.
The Australian Securities and Investments Commission (ASIC) raised concerns that Aussie Credit Cards may have engaged in the practice following Aussie’s introduction of higher interest rates for cash advances for a number of Mastercard customers.
According to ASIC, the Mastercard was advertised as having a “low ongoing rate” of 9.99 per cent per annum, with television advertisements for this rate airing until early May, and online advertising continuing until June 20.
In early June, Aussie introduced a higher rate of 13.99 per cent per annum on cash advances, to take effect on August 10, 2006, ASIC said.
Aussie altered its advertising to reflect this change, limiting references to the 9.99 per cent per annum rate to purchases and referring to the higher rate applying to cash advances.
However, ASIC executive director of consumer protection Greg Tanzer said ASIC was concerned this change was not simply a variation to a variable interest rate, but rather a structural change that considerably altered the product being offered to consumers.
“Here, consumers responding to advertising as late as mid-June would find themselves with a very different card come August 10,” Tanzer said.
“In our view, and having regard to the Aussie advertisements, this is well short of the reasonable period required by law.
“Credit providers need to take into account existing claims in their advertisements before making major changes.
“The law is clear — where financial services are advertised at a specified price they must be offered at that price for a sufficiently reasonable period.”
Aussie agreed to allow cardholders who became customers before June 21 to remain on the low interest rate for at least six months for purchases and cash advances. It also wrote to all affected customers advising them of the outcome.
Tanzer acknowledged Aussie’s constructive approach in considering and responding to ASIC’s concerns.
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