Credit union honours discounted rates after 'misleading' ad campaign

by AB20 Aug 2013

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%p/a.

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

CUA had issued 2,083 Rate Breaker Package loans as of July 23, 2013.

ASIC deputy chairman, Peter Kell, says taking out a home loan is one of the biggest commitments a person or family could make and that consumers should be able to trust the information provided in the marketing of home loans.

“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,” says Kell.

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 August 31 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 four 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 September 30, 2013.

ASIC accepted the undertakings offered by CUA as an alternative to seeking court orders under section 12GNB of the ASIC Act. This approach means 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.


  • by not so old broker 20/08/2013 9:15:36 AM

    Very interesting - so if CBA or NAB decide to advertise a rate of 1% then CUA must offer 0% (it's not below 0%!). But neither the CBA nor NAB is required to actually have anyone on a 1% loan, just to advertise it. I'd suspect there would be loan eligibility criteria that no-one could meet to get that rate.
    Were I a cynic I might postulate an advertisement from one of the Big 4 which would see the demise of the CUA. Very bad drafting of an UEnforceable Undertaking by ASIC if you reporter has quoted it correctly. I shall await the outcome with some interest. times.

  • by Brian Broker 20/08/2013 9:46:54 AM

    To "not so old broker" - the discount is on the average of all 4 major banks, not just one bank. For your scenario to work all 4 majors would need to advertise a variable rate of 1% or less. If they tried that, the next ASIC action would be against the 4 majors.

  • by not so old broker 20/08/2013 10:28:58 AM

    Hi Brian - the EU actually refers to the 'average of the four', so only one of the four has to change its advertised variable rate to change the quantum of the (simple) average, thus triggering my scenario. Also it is not ASIC that would pursue the banks, it is not their jurisdiction, that distinction belongs to the ACCC regarding pricing collusion. But all of them could change their pricing in isolation for the reasons I mentioned and not trigger a prosecution from ACCC, and have the same result, ie no more little competitor(s).