ASIC has announced that it has found a number of banks and mutual authorised deposit-taking institutions (ADIs) were using the term ‘deeming account’ to promote a basic savings account to pension recipients.

ASIC was concerned the way advertising linked these savings accounts to the Government’s deeming rates (which form part of the Government’s social security income test) could mislead consumers. In most cases, the savings accounts offer lower interest rates than the deeming rates, particularly for lower account balances.

ADIs offering transaction accounts for seniors and pensioners should make sure the descriptions of these accounts do not lead consumers to think the accounts offer “deeming” rates when they do not.

The Australian Bankers’ Association has developed a set of guidelines for disclosure about such accounts in response to ASIC’s concerns about aspects of the marketing of pensioner products.

Banks have voluntarily agreed to:

• Ensure these accounts are not named ‘deeming accounts’;
• Phase out certain descriptions that provide the impression that the interest rates on these products matches the deeming rate set by the Federal Government, such as ‘comparable to’, ‘compatible with’, ‘guided by’, ‘reflective of’ and better explain the link between the deeming rate set by the Federal Government and the commercial decisions taken by banks and other financial institutions when setting the interest rate on these accounts; and
• If banks structure the interest rates on these products in a tiered manner according to the account balance, ensure this is clearly disclosed as a feature of the account.