Friday 11 August 2006 06 – Aussie Credit Cards (Aussie) has agreed to suspend the introduction of a higher interest rate for cash advances for a number of Aussie MasterCard customers following concern by the Australian Securities and Investments Commission (ASIC) that it may have engaged in bait advertising.
The Aussie MasterCard was widely advertised as having a ‘low ongoing rate’ of 9.99% p.a. Television advertisements for this flat rate aired until early May 2006, and online advertising continued until 20 June 2006.
In early June, Aussie introduced a higher rate of 13.99% p.a. on cash advances, to take effect on 10 August 2006. Existing customers received written notification of the impending change through mid to late June. Aussie altered its advertising to reflect this change, limiting references to the 9.99% p.a. rate to purchases and referring to the higher rate applying to cash advances. ASIC’s Executive Director of Consumer Protection, Mr Greg Tanzer, said ASIC was concerned this change was not simply a variation to a variable interest rate, but rather a structural change that considerably altered the product being offered to consumers.
‘Credit providers need to take into account existing claims in their advertisements before making major changes’, Mr Tanzer said. ‘The law is clear – where financial services are advertised at a specified price they must be offered at that price for a sufficiently reasonable period. Here, consumers responding to advertising as late as mid-June would find themselves with a very different card come 10 August – in our view, and having regard to the Aussie advertisements, this is well short of the reasonable period required by law.’
Following discussions with ASIC, Aussie has agreed to: • Allow cardholders who became customers before 21 June 2006 to remain on the single low interest rate for at least six months for purchases and cash advances, and • Write to all affected customers advising them of the outcome. Mr Tanzer acknowledged the constructive approach taken by Aussie both in considering and responding to ASIC’s concerns. Page 1 of 2
Background Section 12DG of the Australian Securities and Investments Commission Act 2001 prohibits bait advertising. Section 12DG(2) provides that where a person has advertised financial services ‘at a specified price’, it must offer those services at that price for a period that ‘is reasonable having regard to the nature of the market… and the nature of the advertisement.’
Aussie Credit Cards are provided under agreement by Australia and New Zealand Banking Group Ltd (ANZ). For further information contact: Mr Greg Tanzer Executive Director, Consumer Protection Telephone: 07 3867 4704 Mobile: 0411 549 144 Emma Forehan ASIC Media Unit Telephone: 03 9280 3354 Mobile: 0409 702 310