Home builder Metricon Homes Pty Ltd (Metricon) has paid $50,400 in penalties after the Australian Securities and Investments Commission (ASIC) issued the company with four infringement notices relating to misleading advertising aimed at first home buyers.
According to the corporate regulator, Metricon’s “2K on your way” campaign for its HomeSolution house and land packages (HomeSolution) contained “misleading representations about eligibility to qualify”.
Specifically, ASIC said that the HomeSolution advertisements — which appeared in radio, print, outdoor, electronic and online formats throughout Victoria, Queensland and South Australia between July 2017 and February 2018 — created the impression that consumers who qualified for the first home owner grant could obtain a Metricon HomeSolution house and land package with a $2,000 deposit.
However, it found that consumers were still required to fund the balance of the prescribed 5 per cent deposit (approximately $30,000 on a typical $600,000 package or up to $41,000 on a $825,000 package), which was “financed through an unsecured personal loan, typically through one of Metricon’s associated finance brokers”.
ASIC said that any disclaimer in the HomeSolution advertisements “was not prominent enough to effectively qualify the dominant message of the advertising”.
Further, the regulator outlined that consumers were also required to navigate through links on Metricon’s website to the HomeSolution landing page where eligibility conditions were listed in small font at the bottom of that page.
In response to ASIC’s investigation, Metricon has withdrawn the advertising in question and ceased promoting its “2K on your way” offer.
In a statement, the regulator said: “ASIC reminds all financial services firms to regularly review their advertising compliance arrangements.
“ASIC proactively monitors all forms of advertising, including advertising online, and will take action in appropriate circumstances.”
ASIC under fire by the royal commission
The payment of an infringement notice is not an admission of a contravention of the ASIC Act consumer protection provisions.
Indeed, the corporate regulator has come under fire from Commissioner Kenneth Hayne, who criticised ASIC for its limited use of court action against embroiled entities in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry’s interim report, released on Friday, 28 September.
The report reads: “When banks have disclosed, or ASIC has otherwise learnt of, misconduct, ASIC has almost always sought to negotiate what will be done in response.”
The commissioner acknowledged ASIC’s use of its banning powers, but criticised the regulator’s limited use of court action against embroiled entities.
“Rarely has ASIC gone to court to have the defaulting party penalised. The criminal prosecutions that have been brought have all been directed at individuals. Civil penalty proceedings have seldom been brought,” Commissioner Hayne said.
Commissioner Hayne accused ASIC of too often entering into negotiations with accused parties, which go on to settle an issue through the payment of a financial penalty without having to make an admission of guilt.
“ASIC has issued infringement notices. But by paying the infringement notice the entity makes no admission. It is not taken to have engaged in the relevant contravention,” Commissioner Hayne continued.
“Yet, ASIC and the Commonwealth are prevented from starting a civil or criminal proceeding in relation to the contravention that caused ASIC to issue the infringement notice.”
He noted that ASIC has issued 45 infringement notices to the major banks in the past 10 years, amounting to less than $1.3 million, and accepted 13 enforceable undertakings, which “are heavily negotiated”.
ASIC chair James Shipton has acknowledged the commission’s concerns, stating that it will “carefully consider these observations, as well as the broader findings in the report, and will respond fully in its submission by 26 October 2018”.
“ASIC will continue to assist the royal commission and to work with the government, the Parliament and other regulators to build a stronger legislative, enforcement and regulatory framework with tougher penalties,” Mr Shipton said.
Treasurer Josh Frydenberg was also critical of financial services regulators, including ASIC, claiming that they “have a case to answer”.
[Related: RC report slams ASIC response to misconduct]
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Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.