ASIC Review into Term Deposits
In July 2013, Asic released their report entitled "REP 353 Further review of Term Deposits"
In their original assessment of banks in 2010, ASIC had found:
"Three of our key findings were as follows:
-Seven of the eight ADIs we reviewed had dual pricing. That is, they promoted their term deposits by actively advertising the higher interest rates available on selected deposit terms while maintaining lower interest rates for other deposit terms.
- Because term deposits can renew (or ‘roll over’) on a default basis (unless the investor intervenes), this dual pricing practice could create a risk that a term deposit could roll over automatically from a higher interest rate to a lower interest rate, without the investor being conscious of the change because of absent or limited disclosure in customer communications and disclosure documents.
- There was a high level of default rollovers (a weighted average of 47 % of rollovers) from high interest rates to low interest rates
With the updated further review, ASIC found the following:
We found that the ADIs we reviewed:
-still use dual pricing models;
-have, however, improved their disclosure of the existence and risk of dual pricing, grace periods, and interest rates;
have fewer default rollovers from ‘high’ to ‘low’ interest rates;
- have a significant number of investors using the grace period to make changes to their term deposit; and
have made changes to advertising to adopt our previous recommendation