ASIC’s consumer credit surveillance continues to focus on advertising and responsible lending.
ASIC’s approach to financial services advertising is set out in Regulatory Guide 234: its core message is that even is there is no intention to mislead, an ad misleads if its overall impression is not accurate. Qualifications must be clear and prominent.
How do you assess an ad’s overall impression?
To paraphrase the High Court in ACCC v TPG: it is the impression that the “ordinary or reasonable consumer taking in only the dominant message would have [of the cost], with no other charges and no obligation to acquire another service” if the balance of the advertisement which contained that information was not given sufficient prominence to counter the effect of the headline claim”.
Regulatory Guide 209 sets out ASIC’s expectations for compliance with the responsible lending obligations, including the kind of conduct it expects from credit providers.
ASIC’s surveillance for responsible lending includes assessing whether there is evidence of adequate resources, systems and processes for supervising representatives and how vulnerable consumers are treated.
In the case of consumer leases a recent ASIC announcement identified ASIC’s concerns related to an unlicensed business involved in the hire and sale of water coolers and first aid kits using ‘rent to own’ agreements.
ASIC was concerned that the prices paid by consumers for the goods exceeded their fair market value, meaning the agreements they entered into were credit contracts. This activity required the companies to be licensed under the National Credit Act.
ASIC also was concerned that:
- the companies engaged in unconscionable conduct when dealing with vulnerable consumers, including Indigenous consumers in remote communities, and
- the rent to own agreements contained unfair terms which provided an automatic rollover of the rental term unless the consumer took steps to cancel the contract.
These are areas ASIC will consider when reviewing annual compliance certificates.
