Following concerns raised by ASIC, National Warranty Company (NWC) has agreed to remove statements on its website that implied that being regulated and licensed by ASIC would assist future claims by consumers.
NWC is a provider of warranty products that are classified as 'discretionary risk products' under the Corporations Act. Unlike insurance products, providers of discretionary risk products have the discretion as to whether to pay a valid claim.
ASIC was concerned with the following statement on NWC's website: 'This reputation together with regulation by ASIC and the Australian Financial Services Licence go a long way in assuring our customers that the products they purchase today will be there to assist them if needed in the future.'
ASIC was concerned that the wording of this statement may give the false and misleading impression that holding an Australian financial services licence and being regulated by ASIC meant that NWC was more likely exercise its discretion to pay on future valid claims.
A licence given by ASIC allows people or companies to legally carry on a financial services business, including selling, advising or dealing in financial products.
Consumers who deal with licensed businesses are better protected if things go wrong and you will generally have access to free dispute resolution services. However, having a licence does not mean that ASIC endorses the company, the financial product, the advice, or that you cannot incur a loss from the investment or that a financial product will be suitable for a particular consumer's objectives, financial situation or needs.
ASIC Senior Executive Leader Deposit Takers, Credit & Insurers Mr Michael Saadat said, 'The discretionary nature of these products means that a consumer may not be able to rely on them to cover a risk in the future.
'While it is important for consumers to know they are dealing with a licensed entity, which affords them certain protections under the financial services laws, a financial services licence does not provide a guarantee for the future,’ Mr Saadat said.
Background
National Warranty Company is the trading name of Davantage Group Pty Ltd (AFS licence 438157).
ASIC has provided previous guidance to assist licensees comply with their legal obligations with respect to avoiding false or misleading statements and misleading or deceptive conduct, including specific guidance on representations relating to being licenced by ASIC contained in: