ASIC warns reverse mortgage industry to clean up its act.
The corporate watchdog has come down hard on the growing number of reverse mortgage providers, warning them to stop using misleading and unclear advertising.
The Australian Securities and Investments Commission (ASIC) said it has reviewed suppliers and found five cases of misleading advertisements that made claims suggesting that reverse mortgages did not need to be repaid.
The reverse mortgage market has more than doubled in the last 12 months.
The regulator approached the promoters of the advertisements and said each promoter immediately withdrew or changed their advertising.
The statements used in the advertisements included 'there are no repayments', 'no loan repayments ever' and 'no need to make repayments!!'.
Last year consumer lobby group Choice conducted a shadow shop of 15 reverse mortgage providers and found many had poor product information and contracts with wide default clauses where small oversights could cause retirees to lose their homes.
The majority tried to convince consumers to borrow more money than needed.
"Reverse mortgages are complex products and ASIC wants to ensure that consumers are responding to promotions for them for the right reasons", ASIC executive director of consumer protection Greg Tanzer said.
In March ASIC took out an enforceable undertaking against reserve mortgage provider Transcomm Credit Co-operative Limited.
An investigation found the credit union's advertising included false claims about the product's impact on pension entitlements.
Last week ASIC's new chairman Tony D'Aloisio pledged to conduct blitzes on advertising campaigns of complex products and set up a specialist team to protect retail investors from high risk schemes.
Retirees face the risk of running out of money. We asked Macquarie Funds Group's head of longevity risk solutions Andrew Robertson how this can be avoided.... Watch»
Many in the industry would have been bogged down in submissions given the plethora of government reviews. Next year it will be the government's turn to act on the reviews. ... read more »
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