Tim Gough - ASIC - ASIC action on credit advertising

Credit Advertising

Presentation at the Credit Law Conference 2 October 2014

Tim Gough

Why is advertising important?

Consumers are heavily influenced by advertising

Ads convey simple, attractive messages, and may encourage short-cut decision making

Promoters naturally prefer to focus on benefits or advantages of a product rather than less attractive features like risk or cost

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Key influences on buying decisions

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Source: Deloitte Media Consumer Survey 2014, Australian media and digital preferences - 3rd edition, page 24

Promoting good decisions

“Financial advertising and promotions should clearly explain what the product or service is, how it works and how you could benefit from it. It must also be clear about the costs involved and whether there are any risks to your money.”

- UK Financial Conduct Authority

“We want to ensure that promoters give clear, accurate and balanced messages when promoting financial products…”

- ASIC, RG 234 4

Source: http://www.collectorsweekly.com/articles/the-top-10-most-dangerous-ads/

ASIC’s regulatory guidance

RG 234 represents principles-based guidance

It is (deliberately) not prescriptive

The law may not expressly mandate good or best practice, but where there are grey areas or uncertainty, good practice is unlikely to offend the law

Our guidance is illustrated using examples of advertisements that we consider misleading

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Non-compliance

The consequences of non-compliance can be significant

In ASIC v GE [2014] FCA 701, the Federal Court made declarations and ordered a penalty of $1.5 million for making false or misleading representations to more than 700,000 of its credit card customers

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ACCC v TPG Internet Pty Ltd •  Federal Court (Nov 2011)

–  Adverts misleading, TPG to pay $2 million pecuniary penalties and other relief

•  Full Court (December 2012)

–  TPG’s appeal allowed in part, bundling requirement and set up charges were adequately disclosed in some adverts

–  Reduced penalties to $50,000 (April 2013)

•  High Court (Dec 2013)

–  Full Court erred in finding –  Reinstated $2 million pecuniary penalties

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Overall impression

“The tendency of TPG's advertisements to lead consumers into error arose because the advertisements themselves selected some words for emphasis and relegated the balance to relative obscurity” ACCC v TPG Internet Pty Ltd [2013 ] HCA 54 at [51]

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Some practical examples…

-  “Free” credit

-  “Guaranteed” finance

-  Discounts

-  Bonus offers

-  Comparisons

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Comparison between products must not be misleading

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Surcharges

ASIC was concerned that ALDI did not:

–  consistently disclose in all of its stores that there is a 0.5% surcharge for consumers paying by credit card, and

–  specifically disclose that transactions made using 'tap and go' contactless payment systems are also subject to the 0.5% surcharge, which applies in ALDI stores where either a credit card or debit card is used.

See ASIC media release 14-204

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Industry guidance

“Premiums from $2.80 per day” “Cover of up to $500,000”

• ASIC wrote to the life insurance industry raising concerns that the advertised premium payable is calculated on a sum insured that is significantly lower than the maximum benefit of cover available

• Despite each statement being literally true, adverts could create the impression that there is a relevant link between the two statements such that if you pay the amount advertised you would get the cover advertised

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Questions?

Tim Gough ASIC

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