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Wednesday 13 June 2018

18-173MR Bananacoast Community Credit Union pays $50,400 for misleading advertising and provides remediation to consumers

ASIC enforcement action has resulted in four infringement notices totalling $50,400 to Bananacoast Community Credit Union Pty Ltd (BCU) for potentially misleading statements in several online advertisements, as well as remediation to affected consumers.

The advertisements, which ran in 2017, offered a special interest rate for home loans and personal loans but did not clearly or prominently disclose that the consumer was required to pay for consumer credit insurance (CCI) for five years to receive the advertised lower interest rate. Some advertisements included a fine-print disclaimer while others did not display any further information.

The advertisements that did carry a disclaimer did not give suffient prominence to important conditions and did not adequately explain how some of the conditions operated.

ASIC considered that the ‘click through’ facility used on some websites, which provided additional information on other webpages, was not adequate to  correct the misleading overall impression.

ASIC Deputy Chair Peter Kell said, 'A promotional offer with conditions attached must not bury the conditions in fine print or elsewhere, particularly when the promotion involves a potentially poor value product such as CCI’.

In response to ASIC’s enforcement action, BCU has:

  • Withdrawn the concerning advertising;
  • Offered to cancel the CCI policies and refund the premiums to customers who purchased CCI; and
  • Refunded all premiums paid where the CCI policy had already been cancelled.

The total amount repaid to customers is $91,600 including interest. BCU are also honouring the advertised loan interest rate(s) without the requirement for customers to purchase CCI. BCU has paid the $50,400 penalty.

Read the infringement notices

Background

BCU holds Australian Credit Licence 241077.

CCI is a type of add-on insurance sold with credit cards, personal loans, home loans and car loans. It is promoted to borrowers to help them meet their repayments if they lose their job, become sick or injured or die.

ASIC has taken wide-ranging action in response to CCI sold in different distribution channels, including most recently in car dealerships. In 2016, ASIC released three reports covering its review of the sale of add-on insurance through car dealerships, which found that the insurance is expensive, of poor value and provides consumers very little or no benefit (REP 470, REP 471, REP 492). ASIC subsequently also negotiated over $120 million  in remediation to customers sold these products. See media releases on Allianz, Swann, Suncorp, QBE, Virginia Surety.

ASIC is undertaking a broader review of CCI sales practices by lenders, see 17-255MR Banks to overhaul consumer credit insurance sales processes.  This follows on from ASIC’s Report 256 Consumer credit insurance: A review of sales practices by authorised deposit taking institutions (REP 256) which included a number of recommendations by ASIC, after the review found deficiencies in the areas of sales practices, disclosure, training programs and monitoring. One of the recommendations is that lenders should make a clear statement that the purchase of CCI is optional.

Consumers should think twice before purchasing CCI. ASIC’s MoneySmart website has guidance for consumers so they know what to consider before buying CCI

ASIC can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws.

ASIC issued four infringement notices for representations that appeared in various online advertisements through search engine results and webpages, including BCU’s website, during the period 15 August 2017 to 31 October 2017. These infringement notices relate to some, though not all, of BCU’s advertisements used in its OMG Home Loan and Car Loan Special advertising campaigns.

The payment of an infringement notice is not an admission of a contravention of the ASIC Act consumer protection provisions.

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Last updated: 13/06/2018 02:57