Providers of financial and credit products and services should review their governance, risk and compliance (GRC) arrangements to review advertising and promotions to ensure they are sufficiently robust.
Recently, the Australian Securities and Investment Commission (ASIC) has employed a range of interventionist and preventative strategies to target misleading and deceptive conduct in relation to financial and credit products and services.
Since February this year, 54 advertisements across the financial services and credit sectors have been withdrawn or remedied following action from ASIC, and Commissioner Peter Kell has stated that ASIC will continue to regularly review advertisements.
ASIC's commitment to ensuring that advertising of credit products and services is clear, accurate and balanced can further be seen through ASIC's recent updated Regulatory Guide 234 "Advertising financial products and services (including credit): Good practice guidance".
The updated Regulatory Guide 234 revises and extends the Regulatory Guide 234 (published in February 2012), particularly in relation to the advertisement of credit.
The updated guidance is the culmination of ASIC's June 2012 Consultation Paper 178 "Advertising credit products and credit services: Additional good practice guidance" and Report 313 "Response to submissions on CP 178 Advertising credit products and credit services", which came out last month.
The main changes include…
The updated Regulatory Guide 234 provides new information for advertising credit products and services, with a particular focus on:
- balanced messages about the returns, features, benefits and risks of the product or service, including warnings, disclaimers, qualifications and fine print;
- ensuring fees and costs referred to in advertisements give a realistic impression of the overall level of fees and costs a consumer is likely to pay, including any indirect fees or costs;
- making sure that messages regarding discount interest rates in loan products are clear and include the duration of the discount period as well as the reversion rate;
- ensuring that comparison rates are not less prominent than interest rates when advertised;
- product suitability claims in advertisements, including responsible lending;
- nature and scope of credit assistance; and
- restricted terminology ("independent", "impartial", and "unbiased", "financial counsellor" and "reverse mortgage".)
These areas were raised in CP 178 as being areas that required further explanation in the updated Regulatory Guide 234. The updated Regulatory Guide 234 includes detailed examples of a range of circumstances in relation to the above areas. For example the size, colour, positioning and prominence of how a comparison rate should be advertised is more explicitly described. Many examples effectively address the questions raised in Report 313 "Response to submissions on CP 178 Advertising credit products and credit services".
In light of ASIC's stringent approach to the regulation of financial and credit products and services advertisements it is imperative that promoters critically evaluate their advertisements before publication. While ASIC to date has largely taken a facilitative approach, there has been some indication from ASIC that is more likely to take an enforcement approach moving into 2013, given it has allowed a period of time for credit providers to have regard to the new guidance.
In preparation for this shift, it is timely for providers of financial and credit products and services to undertake a review of their governance, risk and compliance (GRC) arrangements to review advertising and promotions to ensure they are sufficiently robust. If you require assistance in evaluating your GRC arrangements or reviewing advertising and promotional campaigns against the refreshed Regulatory Guidance, we would be happy to assist.