Australia: ASIC flexes muscles over advertising financial products

Key Points:

Consultation paper 178 is a timely reminder to promoters of financial products and financial advice services and publishers of advertising that ASIC will regularly be reviewing ads.

ASIC released Consultation Paper 178 on 5 June 2012 about credit advertising to promote good practice and help industry comply with their legal obligations when advertising credit products and services. CP 178 relates specifically to credit facilities and builds on RG 234, which was released in February 2012 and applies to all types of financial products including credit facilities.

RG 234 sets out a detailed list of "good practice guidance" for particular aspects of financial products, to help promoters to not make false or misleading statements or engage in misleading or deceptive conduct. The guidance mirrors the general provisions and principles in the Australian Consumer Law (contained in Schedule 2 to the Competition and Consumer Act 2010) prohibiting conduct that is misleading or deceptive, or would be likely to mislead or deceive.

The release of this paper follows on from recent activity by ASIC in response to misleading advertisement by several financial institutions1. We are also aware there have been calls from the industry since the release of RG 234 for ASIC to issue more specific guidance on the advertising of credit. Hence, the additional guidance proposed in CP 178 focuses on specific issues relating to advertising of credit products and services, including lending to consumers for personal, domestic or household purposes, small business lending and consumer leases.

A draft updated version of RG 234 is attached to the consultation paper for review, with comments on the consultation paper and draft regulatory guide due by 6 August 2012.

What is ASIC proposing in CP 178?

ASIC makes the following key recommendations in CP 178 and the amended RG 234:

  • Advertisements for financial products and credit products should give a balanced message about the returns, features, benefits and risks associated with the product.
  • Warnings, disclaimers and qualifications should not be inconsistent with other content in the advertisement, including any headline claims. Warnings, disclaimers and qualifications should have sufficient prominence to effectively convey key information to a reasonable member of the audience on first viewing of the advertisement.
  • Where a fee or cost is referred to in an advertisement, it should give a realistic impression of the overall level of fees and costs a consumer is likely to pay, including any indirect fees or costs.
  • Comparisons should only be made between products that have sufficiently similar features or, where an advertisement compares different products, the differences should be made clear in the advertisement.
  • Past performance information should be accompanied by a warning that past performance is not indicative of future performance.
  • Terms and phrases should not be used in a particular way by industry where these are not consistent with the ordinary meaning commonly recognised by consumers (eg. "free", "secure" and "guaranteed").
  • Advertisements should be capable of being clearly understood by the audience that might reasonably be expected to see the advertisements.
  • Where an advertisement draws attention to specific product features, the advertisement should be consistent with information contained in any disclosure documents (such as a PDS or prospectus) or contracts.
  • Photographs, diagrams and images should not contradict, detract from or reduce the prominence of any warnings, disclaimers or qualifications.
  • Advertisements for a financial advice service should not create unrealistic expectations about what the service can achieve. Advertisements about credit assistance should be clear about the scope of the service that will be provided to the customer.

When assessing whether an advertisement is misleading or deceptive, ASIC will consider a range of factors that contribute to the overall impression of the advertisement. False or misleading statements or conduct could contravene the Corporations Act and the ASIC Act and result in ASIC taking action against the promoter.

Powers at ASIC's disposal when confronted with suspected breaches include issuing stop orders, injunctions and public warning notices, cancelling a promoters Australian Financial Services or Australian Credit licence or varying its conditions, enforceable undertakings and seeking civil pecuniary penalties.

What is ASIC's current focus?

Advertisements by financial institutions that ASIC has focused on in its recent activities include:

  • home loan advertisements that did not include the annual fee in the comparison rate. According to ASIC, when promoting a package loan, any fee in connection with a loan to qualify for the advertised percentage rate must be included in the comparison rate. Not including all fees and charges results in a comparison rate not reflecting the loan's true cost, and can be incorrect and potentially misleading;
  • advertisements making strong, definitive claims about financial products and services, without disclosing the basis on which those claims have been made. For example, a bank claiming to have the lowest interest rates may be misleading if the bank only has the lowest rates compared with other banks, while other (non-bank) financial institutions may offer lower rates; and
  • advertisements promoting a home loan discount may be misleading, if the full discount is only available for loans over a certain amount and not all loan amounts. If an offer is only available in limited circumstances, this should be prominently disclosed.

What can you do now?

The clear message from CP 178 and RG 234 is that advertisements for credit products and financial products and advice services must give clear, accurate and balanced messages.

CP 178 and RG 234 seek to further entrench well established understandings of how the misleading and deceptive conduct provisions operate in practice under consumer law, but provide further guidance on the current hot topics of financial and credit products.

Therefore, while it would be expected that industry is familiar with sound advertising practices, recent action taken by ASIC in relation to certain financial institutions' advertisements is a timely reminder that ASIC will regularly be reviewing advertisements and will have little hesitation in enforcing its views on these emerging concerns.

The outcomes ASIC will aim for when confronted with suspected breaches will involve potentially stronger penalties than they have sought in the past. If ASIC does query your advertisement, it is important that you undertake an internal investigation to determine why the advertisement was published in the first place, in breach of RG 234. For example, are advertisements consistently presented for internal sign-off with tight timeframes and then rushed through the approval process, without due consideration to legal and regulatory requirements?

In light of the recent enforcement activity and the release of CP 178 and RG 234, we would encourage licensees to critically review their existing legal risk tolerance for advertising their products and services. In particular, we are encouraging clients to undertake a "health check" upon:

  • their internal advertising systems and approval processes;
  • their advertising checklists and assessment tools;
  • specific advertising training for the marketing departments of clients and those who are undertaking advertising assessment from a quality assurance perspective; and
  • their complaint-handling processes and procedures pertaining to advertising.

The purpose of these health checks should be to both refresh the current risk and compliance arrangements adopted by the credit provider pertaining to advertising matters, and to further ensure that the internal processes adequately take into account and respond to the emerging ASIC concerns.

We would be happy to assist you in conducting your health check and provide some benchmarking feedback should you require it, or generally to assist you should you wish to make any submission or comment on CP 178, due by 6 August 2012.

Footnotes

1 See ASIC Publication 12-11MR "Bankwest amends credit card advertising following action" (4 June 2012), ASIC Publication 12-73AD, "HSBC to change home loan advertising" (18 April 2012), and ASIC Publication 12-03MS "CBA to change Wealth Package loan comparison rates" (12 January 2012).

You might also be interested in...

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions