Wizard takes Kiwibank to the Commission

 Wizard Home Loans has laid a complaint with the Commerce Commission about Kiwibank’s advertising promoting its ‘home loan guarantee’ claiming it is misleading.

In the ad Kiwibank guarantees that it will provide its customers with "the cheapest home loan over six years or we will refund the difference". There is a disclaimer on the ad saying that terms and conditions apply.

However, the terms and conditions aren't on the ad (you have to go to places like Kiwibank's website to get them).

Wizard has produced a legal opinion from KPMG Legal which says the ad is deceptive and misleading on two grounds.

The first is that there is an impression that the bank will refund the difference if it doesn't provide the cheapest home loan. However the small print says that a customer has to make a claim for reimbursement and the burden of proving the claim rests with the customer.

Secondly, KPMG Legal says the advertisement gives the impression that the guarantee applies to all home loans when in fact it only applies to "any equivalent home loan product", and that home loan has to come from one of the big five banks and it specifically excludes ASB Bank owned Bank Direct.

The lawyers say because the exclusions aren't clear the ad is potentially misleading.

KPMG Legal also questions the use of small print disclaimers. "It is well established that a disclaimer is ineffective if it seeks to alter the general impression of an advertisement as a whole. In any event while the disclaimer makes reference to the full terms and conditions, it fails to disclose the nature and effect of those terms, or the limitations on the general impression of the advertisement they contain."

Wizard's New Zealand boss John Grant says that the complaint was lodged with the Commerce Commission a week ago and he is still waiting for a response.

He says Wizard considered sending the complaint to the Advertising Standards Complaints Board, but instead decided to send it to the Commerce Commission on the grounds that the ad broke the Fair Trading Act.

Grant says Wizard (which is excluded from the guarantee) is taking this action because it is on the side of the consumer.

"We’re not against Kiwibank," Grant says. "We welcome new competition that helps bring rates down for borrowers. But we’ve always taken a pro-consumer stance here and in Australia and that’s why we’ve laid the complaint. We think it’s important that consumers aren’t misled, but can make honest comparisons."

"It’s ridiculous to offer a lowest price guarantee against only a handful, but not all, competitors, and against only the most expensive products on the market.

"Consumers could already do much better than bank loans, and even better than Kiwibank, simply by shopping around among low cost and non-bank lenders", he said.

Grant said the worst thing about the Kiwibank ‘guarantee’ was that the onus was on the customer to prove, after six years of borrowing, that he or she could have done better elsewhere and only then would Kiwibank consider a refund – whereas the advertisement implied that the refund of the difference was automatic.

"Six years is 18 months longer than the average life of a mortgage in New Zealand – which was 4.6 years," Grant says.

"Even within the ridiculously narrow definition of its guarantee, I doubt anyone would ever get any money back," he said.