The Australian Securities and Investments Commission (ASIC) has specifically warned banks against the practice of direct mailing term deposit clients advertising ‘special' or ‘exclusive' rates when those rates are generally available to all clients.
The warning is contained in a second review of term deposit arrangements which, while confirming that the banks had improved many of their practices since a first review in 2009, stated that a number of issues still remained, including what might amount to misleading advertising.
"Some Authorised Deposit-taking Institutions (ADIs) conducted mail-out campaigns to existing ‘selected' customers, advertising term deposits at ‘special' rates or as a ‘special' or ‘exclusive' offer," the review said. "This may be misleading if the offered rates are generally available. It would also assist consumers if interest rate schedules were enclosed with such letters so that they are aware of all other term deposit rates available at the time."
However, the ASIC report said the banks had improved with respect to declaring when dual pricing occurred and when investors were at risk of moving from ‘high' to ‘low' rates via automatic rollovers.
But the underlying message in the ASIC report was that term deposits remain a core vehicle for elderly Australian investors, with those aged over 65 accounting for 45 per cent of term deposit-type investments.
Commenting on the review findings, ASIC deputy chairman Peter Kell said the industry had largely adopted ASIC's recommendations, whilst noting the need for continued monitoring of the effectiveness of the disclosures being made.
"It is essential that investors are provided with timely information about the risks and the return they will get if they let their deposit rollover," he said.
Kell said there was a need for ongoing vigilance by investors using term deposits and that they were not a set-and-forget investment.
He said ASIC would continue to monitor the term deposit market to encourage further improvements to disclosure, including by ADIs which did not participate in the review.
