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12–03MR CBA to change Wealth Package loan comparison rates
The Commonwealth Bank of Australia (CBA) has agreed to change advertised comparison rates for its Wealth Package loans in response to ASIC concerns the rates used in ads were incorrect and potentially misleading.
Under the National Credit Code, credit ads that include an annual percentage rate must also include a comparison rate. Comparison rates incorporate the fees, charges and interest relating to a loan to better reflect the true cost of credit.
ASIC was concerned CBA’s home loan ads promoting its Wealth Package loans did not include the Wealth Package $350 annual fee in the advertised comparison rate.
When promoting a package loan, any fee in connection with a loan to qualify for the advertised annual percentage rate must be included in the comparison rate. Not including all fees and charges results in a comparison rate not reflecting the loan’s true cost.
‘Comparison rates help consumers work out the true cost of credit. It can be difficult for people to compare home loans with different combinations of interest rates and fees. This is why credit providers must include the comparison rate when they advertise a rate or a weekly payment for a home loan, and ASIC will be active to ensure compliance in this area,’ ASIC Commissioner Peter Kell said.
‘Consumers will be more confident if they have information that allows them to properly understand and compare financial products,’ said Mr Kell.
In 2012, ASIC will release a consultation paper on advertising of credit products. This will complement the proposed general guidance on advertising financial products and financial advice, on which ASIC recently consulted. (refer 11-186MR).