Consumer Protection

Australian Bank Changes Potentially Misleading Home Loan Ads
Asia Pacific

The Australian Securities and Investments Commission (ASIC) has announced that HSBC Bank Australia has “changed the advertising for its current ‘Let’s Bankercise’ campaign, in response to ASIC concerns that ads promoting a home loan discount were potentially misleading”. The misleading nature of the advertisement was centred on its headline claim that consumers could receive “[u]p to 0.95% [per annum] off a HSBC Home Smart Loan” with a minimum [A]$250,000 loan offer. However, the fine print revealed that “only loans of [A]$1,500,000 or larger were eligible for the full 0.95% discount, with smaller loan amounts starting from A$250,000 receiving smaller discounts”. ASIC commissioner Peter Kell stated that “ASIC does not consider that a promoter can rely on statements such as ‘up to’ if, in fact, the offer being promoted is only available in limited circumstances and this is not prominently disclosed”.
ASIC’s media release (18 April 2012)
(Source: ASIC)

Australian Bank Withdraws Unsolicited Invitations to Increase Credit Card Limit
Asia Pacific

The Australian Securities and Investments Commission (ASIC) has announced that Westpac has withdrawn misleading messages regarding credit card limit increases. Although the messages “sought customers’ consent to receive credit card increase invitations”, ASIC expressed concern that they were misleading as they represented to customers that “if they did not consent, customers could miss out on accessing additional funds”, and “created the impression that customers needed to act urgently, which may have led customers to respond without properly considering their options”. In fact, no such urgency existed as “under the changes to the law, [in July 2012] customers can provide or withdraw their consent at any time” and even if they have not consented to being sent credit limit increase invitations, “customers can request a credit limit increase from their financial institution at any time”. Westpac will not rely on the consent obtained from potentially misled customers, and will attempt to rectify any misleading impressions, according to ASIC commissioner Peter Kell.
ASIC’s media release (24 April 2012)
(Source: ASIC)

Mortgage Lending Co Settles SEC Case, Agrees to Pay US$28.2 Million

The United States (US) Securities and Exchange Commission (SEC) has announced that mortgage lending company and H&R Block subsidiary Option One Mortgage Corporation (Option One), now known as Sand Canyon Corporation, has agreed to pay US$28.2 million to settle SEC charges (24 April 2012) which alleged that Option One “[misled] investors in several offerings of subprime residential mortgage-backed securities (RMBS) by failing to disclose that its financial condition was significantly deteriorating”. According to SEC Division of Enforcement director Robert Khuzami, despite Option One’s increasingly unstable financial position following the collapse of the US housing market, it “nonetheless concealed from investors that its perilous finances created risk that it would not be able to fulfill its duties to repurchase or replace faulty mortgages in its RMBS portfolios”. Option One depended on H&R Block “to provide it with financing under a line of credit in order to meet its margin calls and repurchase obligations” and failed to disclose to investors that H&R Block “was under no obligation to provide that funding”.

According to the SEC, Option One has “consented to the entry or an order permanently enjoining it from violating Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and requiring it to pay disgorgement of [US]$14,250,558, prejudgment interest of [US]$3,982,027, and a penalty of [US]$10 million”.

SEC’s media release (24 April 2012)
(Source: SEC)

UK Airline to Pay £58.5 Million Fine Over Anti-competitive Practices

The United Kingdom (UK) Office of Fair Trading (OFT) has announced that it has imposed a £58.5 million fine on British Airways (BA) for its role in the price-fixing scheme between it and Virgin Atlantic Airways (VAA). VAA escaped a fine as it informed the OFT of the scheme and therefore was protected under the OFT’s leniency policy. According to the OFT, “between August 2004 and January 2006, BA and VAA co-ordinated their surcharge pricing on long-haul flights to and from the UK through the exchange of pricing and other commercially sensitive information”. The fine is less than half of what BA originally resolved to pay in August 2007, which was £121.5 million. The OFT stated that the fine was reassessed due to a number of factors which “included legal developments regarding penalty setting for competition law infringements and the fact that the overall value added to the OFT’s investigation by BA’s co-operation was greater than had been anticipated at the time of the original agreement”.
OFT’s media release (19 April 2012)

Related news item:
Bloomberg: British Airways Fuel-Price Fix Fine Cut to 58.5 Million Pounds (19 April 2012)
(Source: OFT; Bloomberg)

UK Regulator’s Statistics Reveal More Share Fraud But Less Loss
Europe, Middle East and Africa

The UK Financial Services Authority (FSA) has announced that according to its statistics, share fraud rose by 19% in 2011, however, fewer people were conned into investing with the fraudsters, with a 7% drop in investors. According to the FSA, this percentage “represents a significant amount of money that could have been saved” because the average loss suffered by investors is around £20,000.

FSA’s media release (17 April 2012)
(Source: FSA)