by Jenny Ruth
New Aussie Finance, which gained a licence to sell Wizard Home Loans to the Chinese and Korean population in the Auckland area, advertised a loan at a 3.22% a year floating rate and promised no application fee, no monthly fee and no annual fee.
The Commerce Commission found the advertisement was misleading because the interest rate applied only to the first month of the loan, it was available only on loans of $300,000 or more and because there was actually a $600 application fee.
Wizard has frequently campaigned against "honeymoon deals," which offer a cheap rate to begin with, although these are usually six months deals. It has also campaigned for lenders to have to reveal the true interest rate applying to any loan.
John Grant, head of Wizard in New Zealand, says the incident is his company’s "worst possible nightmare."
Both the advertisement and the actual offer breached Wizard’s rules, even if it had been advertised correctly. It was the licencee, not Wizard, who offered the honeymoon deal and who would have paid the difference between the offer and Wizard’s standard 6.95% floating rate.
Grant says the licencee should have submitted the advertisement to Wizard for approval before the advertisement was run.
As it was, Wizard picked up the problem before the Commerce Commission and the advertisement was immediately withdrawn. It ran only once in a single Chinese language newspaper, Property Overview, which has a circulation of about 3,000 people, just after New Aussie Finance was granted its Wizard licence.
"No one has taken up the offer. If they had, we would have made sure that they (the licencee) fully complied with the offer that was made," Grant says.
If the licencee had followed Wizard’s principles and advertised the true interest rate applying to the loan, "it would have been so close to 6.95% that you would have had to call it 6.95%," he says.
Last year, the government’s Kiwibank was forced to admit to misleading advertising following a Commerce Commission investigation sparked by a complaint from Wizard.
Wizard, which sources its funding from Australian Mortgage Securities (AMS), now has 14 branches in New Zealand and more than 175 in Australia.
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