Mutuals modify claims on home loan savings

Advertising claims that consumers can save $35,000 by switching their mortgage from a big bank to a credit union will be amended and disclosures upgraded after bank complaints about "misleading" credit union advertising.

ASIC has acted on an Australian Bankers Association complaint and forced Abacus, the mutual banking sector's industry group, to change its TV advertising claims, which are based on Infochoice research, by $5000.

The advertisements, which first aired in June, were based on comparisons worked out on 9 March, after the RBA and big banks had raised their rates by 0.25 per cent but one day before the credit unions raised rates by the same amount.

The new claims are based on an average of four fresh Infochoice comparisons run on random dates in August, a month with no RBA rate rise complications.

Infochoice changed some methodology for the new comparisons, including ensuring that at least two major credit unions were in each group of four mutuals that was compared with an average of the big four bank's standard variable mortgage rates on random dates selected in August.

Abacus had to deal with three major concerns that ASIC had, said CEO Louise Petschler.

Firstly, the accuracy of the $35,000 claim. Secondly, the issue of factoring in RBA rate rises during the point-in-time comparisons, and thirdly, making explanations and disclosures as clear as possible.

Key points of disclosure will now be voiced rather than written in fine print at the bottom of screen.

"ASIC said they thought if the claim is spoken then the clarification, explanation, and disclosure should be spoken as well," said Petschler.

 "We think a high standard has now been set for disclosure in comparative advertising by financial institutions and we are happy to comply with that.

"We think we are making a conservative claim of $30,000, which is really at the lower end of the comparisons between banks and credit union advertised mortgage rates."

Petschler said Infochoice found that the average saving between the average rate of the big four banks and a selected group of credit unions was more like $38,000.

Steven Münchenberg, chief executive Australian Bankers Association, said he was satisfied with the outcome of ASIC's investigation of his complaint.

A second six-week nationwide media buy of the revised and rescripted advertisements will begin on Sunday.

Petschler said the credit unions are determined to continue the campaign because it is working.

"Banks always complain when mutuals get on the front foot and market themselves. Our first run of the campaign was working and we maintain it was clear and accurate.

"Now we feel we have a campaign that sets a standard for the industry. This is the rolled-gold, gold standard of disclosure in comparative advertising by a financial institution," said Petschler.

"We have learnt that there is a lot of expectation and banks will need to sharpen their facts and disclosure; we certainly will be looking at where we can point that out for them."