CUA honours discounts from misleading ads

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 were issued in July and featured on television, in cinemas, online, 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.

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.”

CUA has also entered into an enforceable undertaking with ASIC as a result of its investigation, which 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%.