Developing a loan package product requires attention to detail and co-ordination between product managers, IT and marketing in order to ensure that customers get what they are promised.

Under CUA’s Rate Breaker Package when a person borrows $250,000 or more they are entitled to a home loan interest rate 1%p.a. lower than the average of the advertised standard variable rates of the Big 4 Banks and other benefits.

But ASIC reached the view that CUA’s advertisements were misleading as they did not accurately reflect the loan package product terms.

ASIC’s view was that the ads gave the impression that the discount applied to the life of any loan under the ‘Rate Breaker Package’ banner. This was not the case.

The terms and conditions of the Package:

• enabled CUA to change the 1% discount at any time; and
• stipulated that the interest rate could not fall below a minimum rate of 3% per annum.

The advertisements featured on television, in cinemas, the CUA website, and on public transport in Sydney, Brisbane and Melbourne.

The terms and conditions either did not feature in the advertisements or where they did feature, they were not sufficiently displayed.

CUA has entered into an enforceable undertaking with ASIC which includes requirements that CUA will:

• ensure that all consumers who entered into a Rate Breaker Package loan up to 31 August 2013 will, for the duration of their loans, receive a discount of no less than 1% off the average of the variable interest rates advertised by the ‘big 4’ banks, except were it to be less than 0% (CUA had issued 2083 Rate Breaker Package loans as at 23 July 2013).
• sufficiently highlight both the 3% per annum minimum interest rate and its ability to change the 1% discount rate in all future advertising of the Rate Breaker Package; and
• notify existing Rate Breaker Package customers of its undertaking to honour the 1% interest rate discount by 30 September 2013.