Aussie Credit Cards (Aussie) has agreed to
suspend the introduction of a higher interest rate for cash advances
for a number of Aussie MasterCard customers following concern by ASIC
that it may have engaged in bait advertising.

The Aussie MasterCard (provided by ANZ) was widely advertised as
having a ‘low ongoing rate’ of 9.99% p.a. Television advertisements for
this flat rate aired until early May 2006, and online advertising
continued until 20 June 2006.

In early June, Aussie introduced a higher rate of
13.99% p.a. on cash advances, to take effect on 10 August 2006.
Existing customers received written notification of the impending
change through mid to late June.

Aussie altered its advertising to reflect this
change, limiting references to the 9.99% p.a. rate to purchases and
referring to the higher rate applying to cash advances.

ASIC’s Executive Director of Consumer Protection, Mr
Greg Tanzer, said ASIC was concerned this change was not simply a
variation to a variable interest rate, but rather a structural change
that considerably altered the product being offered to consumers.

‘Credit providers need to take into account existing
claims in their advertisements before making major changes’, Mr Tanzer
said.

‘The law is clear – where financial services are
advertised at a specified price they must be offered at that price for
a sufficiently reasonable period. Here, consumers responding to
advertising as late as mid-June would find themselves with a very
different card come 10 August – in our view, and having regard to the
Aussie advertisements, this is well short of the reasonable period
required by law.’

Following discussions with ASIC, Aussie has agreed to:

• Allow cardholders who became customers before 21
  June 2006 to remain on the single low interest rate for at least six
  months for purchases and cash advances, and
• Write to all affected customers advising them of the outcome.

 Section 12DG of the Australian Securities and Investments Commission Act 2001 prohibits bait advertising.

Section 12DG(2) provides that where a person has
advertised financial services ‘at a specified price’, it must offer
those services at that price for a period that ‘is reasonable having
regard to the nature of the market… and the nature of the
advertisement.’