Credit Union Australia Limited (CUA) has agreed to maintain interest rate discounts for eligible home loan customers after an ASIC investigation raised concerns that the credit union's advertising was misleading.

ASIC's investigation focused on advertisements for CUA's 'Rate Breaker' home loan package, which featured on television, in cinemas, the CUA website, and on public transport in Sydney, Brisbane and Melbourne.

The Rate Breaker advertisements highlighted a 1% discount off the average standard variable interest rates advertised by the 'big four' banks.

ASIC'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. This was not the case. Rather, the terms and conditions of the Package:

• enabled CUA to change the 1% discount at any time; and

• stipulated that the interest rate could not fall below a minimum rate of 3% per annum.

The terms and conditions either did not feature in the advertisements or where they did feature, they were not sufficiently displayed.

CUA had issued 2083 Rate Breaker Package loans as at 23 July 2013.

ASIC Deputy Chairman Peter Kell said that taking out a home loan was one of the biggest commitments a person or family could make.

'Consumers should be able to trust the promises and information provided in the marketing of home loans,' Mr. 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'.

Enforceable undertaking

CUA has also entered into an enforceable undertaking (EU) with ASIC as a result of its investigation. The EU includes requirements that CUA will:

• ensure that all consumers who entered into a Rate Breaker Package loan up to 31 August 2013 will, for the duration of their loans,receive a discount of no less than 1% off the average of the variable interest rates advertised by the 'big 4' banks, except were it to be less than 0%

• sufficiently highlight both the 3% per annum minimum interest rate and its ability to change the 1% discount rate in all future advertising of the Rate Breaker Package; and

• notify existing Rate Breaker Package customers of its undertaking to honour the 1% interest rate discount by 30 September 2013.

Download the enforceable undertaking

Background

ASIC accepted the undertakings offered by CUA as an alternative to seeking court orders under section 12GNB of the ASIC Act. This approach ensures the discount applicable to loans taken out by borrowers under the Rate Breaker Package would not fall below the advertised 1% discount.

ASIC has been active in monitoring misleading or deceptive advertising across a range of industries over the past few years.

Some examples of recent ASIC actions include:

13-177MR ASIC concerns prompt Woolworths to change insurance ads

13-176MR ASIC concerns see CBA and HSBC change advertising

13-152MR ASIC acts to improve consumer understanding of funeral insurance

13-112MR ASIC concerns sees payday lender change advertising

13-088MR Fair Finance Australia pays infringement notice penalty

12-198MR GE Money changes personal loan online advertising

12-197MR ASIC takes action on payday loan advertising

12-153MR RAMS changes advertising in response to ASIC concerns

ASIC has published a regulatory guide in relation to advertising: RG 234 Advertising financial products and advice services (including credit): Good practice guidance [RG 234].