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Credit unions and building societies mislead
consumers on home loan interest rates
Sydney, 21 May 2010: The Australian Bankers’ Association (ABA) said research used by the organisation which represents credit unions and building societies – Abacus - is misleading for consumers.
A media statement from Abacus claims that “….homeowners with a mortgage from a credit union or building society are $35,000 better off over the life of the loan.”1
Steven Münchenberg, Chief Executive of the ABA, said: “We believe the research, on which Abacus is basing this claim, is deceptive and misleading. The research done by Infochoice, is concerning because it doesn’t reveal to consumers the average interest rate charged across credit unions/building societies, but simply cherry picks from only four of 122 credit unions and building societies.”
“Infochoice selectively used the best variable rates from only four credit unions/building societies but did not make the same comparison for the banks. It compared ‘apples and oranges’ when it should be a like-for-like comparison.”
“This isn’t a robust analysis, is a misleading comparison and does nothing to inform the consumer of differences between financial institutions.”
Mr Münchenberg noted that the vast majority of bank customers with home loans do not pay the advertised standard variable rate.
Mr Münchenberg said: “We welcome competition from the credit unions/building societies and debate about all aspects of banking, but at all times claims made should be based on the facts, and not misleading information.”
“The misleading information provided by Abacus is very concerning because it could lead consumers to make poorly informed decisions when choosing a home loan which is one of the most important financial decisions for individuals and families.”
“As we believe the information is misleading, the ABA intends seeking legal advice and considering referring the matter to the regulator.”
The ABA requested and was provided more information regarding the media statement from Abacus, specifically the research methodology from Infochoice to understand the claim made.
There are three main reasons why Infochoice information misleads consumers:
- Cherry picked data - it doesn’t reveal to consumers the average interest rate charged across credit unions/building societies, but only from four of 122 credit unions and building societies.
- Selectively chose rates – the best variable rates for only four credit unions and building societies were compared with the standard variable rates for the major banks.
- Infochoice data timeliness – at any point in time, interest rates quoted on the Infochoice website may not be up-to-date, particularly for small credit unions.
Mr Münchenberg said: “When shopping around for financial products and services, customers should always make sure they contact financial institutions to obtain the most up-to-date rate information and also to discuss the best offers available.”
For further information:
Heather Wellard
Director, Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
ENDS
[1] Credit unions and building societies emerge from GFC with 30% growth in new home loans, 20 May, 2010 http://www.abacus.org.au/media-a-resources/media-release-alerts/655-credit-unions-and-building-societies-emerge-from-gfc-with-30-growth-in-new-home-loans- |
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