Major consumer finance company, GE
Money has been bought to task by ASIC following concerns over misleading advertising.
According to the regulator, the advertisements – which claimed “one of the best rates in the market” – were promoting products which were subject to risk based pricing. Risk based pricing is where the interest rate offered to the consumer is dependent on the consumer's credit risk profile, as assessed by the credit provider.
Under this pricing model the consumer applies for the product without knowing what interest rate they will be offered, but information provided online by GE
Money described the interest rate as “one of the best rates in the market, from 12.99% (comparison rate 14.20%) for loans over $10,000 for new customers.”
However, a consumer applying for the risk-based product could be offered an interest rate between 12.99% and 34.95%.
ASIC said the overall impression given by the advertisement was that all customers would receive an interest rate that was “one of the best rates in the market”, when this was not correct and could mislead consumers.
ASIC deputy chairman Peter Kell said the regulator would now be keeping its eye on risk-based credit products.
“Price-based marketing fosters competition and can be beneficial to consumers. However, promoters need to ensure that consumers are not misled about an advertised interest rate when their risk profile may affect the actual interest rate offered.
“With the increasing practice of risk-based pricing of credit products, ASIC will continue to monitor advertisements in this space and will take action in response to misleading advertisements.”