Kiwibank ads misleading

By KEVIN TAYLOR

Kiwibank has admitted that a home loan guarantee it offered in September and October was liable to mislead consumers, the Commerce Commission says.

The commission said yesterday that it had negotiated a settlement with the Government-owned bank after a complaint from Wizard Home Loans that it breached the Fair Trading Act.

Kiwibank had offered "cheaper home loans guaranteed", or it would refund the difference if a customer was better off elsewhere over the next six years.

After investigating, the commission found that the advertising in newspapers and on television was liable to mislead consumers into believing Kiwibank would undercut loans made by any lender.

In fact, the offer applied only to equivalent home loan packages offered by banks with branches nationwide. That therefore excluded non-bank lenders such as Wizard.

But the commission also uncovered the fact that Kiwibank only ever intended its guarantee to equal the lowest rate of a competitor - not exceed it.

Commission director of fair trading Deborah Battell said for the bank to run a campaign saying it was going to be the cheapest or cheaper - when its intention had been to only match - was misleading.

"If you are matching you are not going to be the cheapest."

Kiwibank had now changed its loan processes to ensure it did in fact deliver on its promise.

Battell said the Wizard complaint had been only about the offer applying to the major trading banks and not to non-bank home lenders.

It was in studying Kiwibank's advertising more closely that the commission found the bank had been offering only to match home loan rates of competitors, not be the cheapest, she said.

Kiwibank external relations manager Bruce Thompson said that did not necessarily mean all its rates would now be cheaper than the main trading banks all the time.

What the bank was guaranteeing was that after six years its customers would be better off.

The bank was saying to customers not to worry about the other banks' rates.

"We believe that our rates are so competitive, and will remain so competitive, that we will be prepared to guarantee the outcome."

He said Kiwibank believed it was unlikely to have to pay out money.

Chief executive Sam Knowles denied the issue was an embarrassment.

The bank changed its advertising and the wording of its guarantee in early November after the commission brought the complaint to its attention.

"We had never really appreciated the fact that it would be understood in the way it was understood," he said.

"We said in the ads that we would guarantee a cheaper home loan. What was pointed out to us is that the wording we had adopted in the guarantee would only provide an equal-cheapest home loan, as distinct from the cheapest."

Knowles said no customer had ever raised the issue.

The head of Wizard New Zealand, John Grant, said the settlement was only a partial victory for home buyers.

While he was pleased the commission had agreed with Wizard's complaint and found against Kiwibank, a real consumer victory would have been a recommendation to withdraw the advertisement rather than recommending some rule changes.

"The average homebuyer is highly unlikely to challenge Kiwibank's guarantee because it would be next to impossible to work out the real rates across all the banks in order to claim the promise of cash to better the difference."

Herald feature: KiwiBank