Huh????  ASIC panning the use of bank calculators re mortgages 2004 and then in 2005 exempted bankers from prosecution????   Its game on!!!  Thanks Gladys  This email address is being protected from spambots. You need JavaScript enabled to view it.

http://www.theage.com.au/news/property/end-of-the-line/2004/09/22/1095651380749.html

 

September 22, 2004

 

The Australian Securities and Investment Commission (ASIC) has shut down loan calculators on more than 100 Australian websites in another move against line-of-credit home loans that use false advertising to trick unwary borrowers.   The calculators were on websites of financial institutions, including banks, building societies, credit unions and mortgage brokers...............In response to ASIC's move, the Mortgage Industry Association of Australia (MIAA) this week released advertising guidelines for its members, prohibiting false advertising under the threat of sanctions.  "Brokers must portray things the way they really are," says its chief executive officer, Phil Naylor.

 

"You can use charts and graphs to sell loans but they must show the repayments correctly. The calculator is one of the issues we address specifically in the guidelines."  The calculator produced a graph showing line-of-credit loans could result in savings for borrowers. It suggested line-of-credit loans could be paid down faster than a traditional home loan, ASIC says.  "However, the way the calculator was designed meant that: extra repayments were credited to the line-of-credit loan but not to the standard home loan; the line-of-credit was at the same interest rate as the standard home loan; and these assumptions were not made clear to the consumer," an ASIC statement says.  "Line-of-credit loans will not be paid off faster than a standard home loan if the same repayments are made into both loans," ASIC's executive director, Greg Tanzer, says.  Examination of Sample and Partners' sales techniques revealed the mortgage broker used "smoke and mirrors" to hide the fact that more money was paid into its line-of-credit loans to get the loan paid down faster than a standard home loan.  Borrowers could be up for as much as $8000 once refinancing costs are taken into account.

 

Carolyn Bond, the manager of the Consumer Credit Legal Service in Victoria, says line-of-credit loans typically come with higher interest rates than standard variable loans, and high fees and charges that penalise borrowers before they even start reducing their debt.  "We have been complaining to ASIC about the misleading advertising associated with these loans for a long time," says Bond.  "Brokers offer them as 'mortgage reduction services' and that's a total hoax. But some mainstream financial services firms have also been profiting from the fact that consumers are mislead over these loans."

 

Tanzer says use of the calculator by financial institutions breached the "misleading and deceptive conduct" section of the ASIC ActHe says some "debt reduction" schemes could also fall foul of the same section of the act, "but not all cases are black and white".  "The calculators were clearly misleading because they provided a comparison between different things," he told Money.

 

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