ASIC has raised concerns over banks failing to correctly advertise comparison rates, but a top broker has claimed the rates are unhelpful to consumers in the first place.
In a letter to FBAA president Peter White obtained by Australian Broker, ASIC has expressed concern about the way lenders are advertising comparison rates. ASIC said it had identified numerous areas of non-compliance with NCCP guidelines around comparison rates, and asked the FBAA to raise its concerns with members. The watchdog said many lenders are not advertising the rates correctly.
“ASIC wishes to ensure that advertising of the cost of credit and the use of comparison rates is not confusing or misleading, and that it assists consumers to make informed decisions when purchasing credit products,” the regulator said.
The problems ASIC identified were lenders failing to consistently advertise comparison rates along with annual percentage rates, not advertising the rates prominently enough, failing to include an NCCP prescribed disclaimer about the accuracy of comparison rates and failing to properly calculate comparison rates. But MPA Top 100 Broker Ian Jordan of The Selector Group has claimed the rates are doing nothing to help consumers, and may instead be a source of confusion.
“I don't think it's the fault of the banks. I think it's the fault of the requirement to advertise the comparison rate, full stop,” Jordan said.
While Jordan said lenders could manipulate comparison rates to their own advantage, he commented that borrowers often misinterpreted the rates as well.
“I think it can be really misleading, and that's not just because banks are really clever. The issue is that the comparison rate can be advertised a number of ways, and the client is looking at it through rose coloured glasses and assuming it's going to be the right loan for them,” he said.
Jordan argued that comparison rates did not reveal important details such as product features that may be beneficial to borrowers. However, the confusion surrounding comparison rates could present an opportunity for brokers. Jordan urged the industry to seize on the issue, communicating to consumers that brokers are best-placed to interpret the complexities of loan products.
“The MFAA really should be jumping on this and using it as a point to get to market,” he said.