Download Complaint 07/479 - New Zealand Advertising Standards Authority

07/479
AWAP 07/011
DECISION
Special Meeting 27 November 2007
Convened Pursuant to Rule 3 of the
Constitution of the Advertising Standards Complaints Board
Complaint 07/479
AWAP 07/011
Complainant: ANZ National Bank Limited
Advertisement: Kiwibank Limited
Complaint: A television advertisement for Kiwibank Master Card Zero was
presented by a man, who was introduced as “Col, a bloke in a penguin suit”. “Col”,
presented the following message: “The new Kiwibank Master Card Zero. New
Zealand’s first every day credit card with no account fees. Zilch. Zip. Not a sausage.
Zero.” A small graphic appeared at the end of the message stating: “Service fees
may apply”. The message: “Kiwibank Master Card Zero the only everyday card with
no account fees” is then repeated as the card is presented for viewing.
The Complainant, ANZ National Bank Limited, said:
Kiwibank is currently airing a television advertisement for the Kiwibank MasterCard
Zero credit card. The advertisement was first brought to our attention after an airing
on 27 August 2007.
In our view, Kiwibank's advertisement breaches the Code of Conduct for Financial
Advertising because it contains some incorrect and misleading statements. In
particular:

that the Kiwibank MasterCard Zero product is the first everyday credit
card with no account fee; and

that the Kiwibank MasterCard Zero product is the only everyday credit
card with no account fee.
The National Bank's Freestyle MasterCard has no annual account fee and has been
in the market since 2001. Clearly the Kiwibank MasterCard Zero product is not the
first, nor the only, credit card on the market with no annual account fee.
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In addition, we consider the claim that the Kiwibank MasterCard Zero product has no
account fees ("zilch, zip, not a sausage, zero") is misleading. Although the card has
no annual account fee, the `inactivity fee' is clearly an account fee as it is a fee
relating to the use and availability of the account.
We raised these concerns in a letter to Kiwibank dated 3 September 2007 and
received a response dated 7 September 2007. Both our letter and Kiwibank's
response are attached.
We strongly disagree with Kiwibank's attempt to justify its position, as set out in its
letter of 7 September.
We consider that Kiwibank's attempt to distinguish between the two cards, on the
basis that the Kiwibank MasterCard Zero is an 'everyday card' and the National
Bank Freestyle MasterCard is not, is untenable. We do not consider that this is a
valid distinction in the credit card market or that customers would make any such
distinction. In addition, for certain types of customers (especially those who make
more than two purchases a month and who regularly incur interest on their
outstanding balance) the National Bank Freestyle MasterCard serves their everyday
needs as well as, if not better than, some of the more standard card products.
We consider that Kiwibank's assertion that its inactivity fee is a transaction fee and
not a type of account fee is unjustifiable. The inactivity fee is not imposed as a result
of a transaction but instead relates to having the facility available where the customer
has failed to use it.
The National Bank Freestyle MasterCard attracts a $5 purchase fee (capped at $10
per month) when it is used. This fee is clearly a transaction fee. However, we are
careful to ensure that all of our advertising refers to the existence of a purchase fee
when identifying that the card has no 'annual account fee. As customers do not make
these fine distinctions between types of fees we consider that it is misleading to state
that the card has no annual account fee without also referring to the fees related to
its use (or non-use in relation to the Kiwibank card).
We request that the Advertising Standards Complaint Board investigate our
complaint and take appropriate action.
The Chairman ruled that the following provisions were relevant:
Code for Financial Advertising
Basic Principle 2: Financial advertisements should observe a high standard of
social responsibility particularly as consumers often rely on such services for
their financial security.
Basic Principle 3: Financial advertisements should strictly observe the basic
tenets of truth clarity and should not by implication, omission, ambiguity, small
print, exaggerated claim or hyperbole mislead, deceive or confuse, or be likely
to mislead, deceive or confuse consumers, abuse their trust, exploit their lack
of knowledge or, without justifiable reason, play on fear.
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Procedure: The Chairman ruled to deal with the matter by “adjudication with
attendance of the parties” pursuant to Rule 3 of the Complaints Procedures of the
Advertising Standards Complaints Board. This system was designed to resolve
disputes between competitors. Accordingly, the Chairman appointed a Panel.
The Panel: Mr R. Thompson, Chairman of the Advertising Standards Complaints
Board. Co-panelists Mr E Abernethy, Chairperson of the Advertising Standards
Complaints Appeal Board and Mr R Moffat, Member of the Advertising Standards
Complaints Appeal Board.
The Complainant: ANZ National Bank Limited, was represented by Mr M.
Wilkshire, Head of Consumer Finance and Mr S Wellik, In House Counsel. Ms K.
Barry attended as an observer.
The Advertiser: Kiwibank Limited, was represented by Ms T Cowan, Manager of
Credit Cards and Ms K. McLean, Buddle Findlay. Mr T. Bennett attended as an
observer.
The Advertiser, Kiwibank Limited, said:
1.
We refer to your letter dated 25 October 2007. We set out below our response
to ANZ National Bank's letter of complaint about Kiwibank's advertisement for
its MasterCard Zero credit card product.
2.
ANZ National Bank has made two allegations about Kiwibank's advertisement:
3.

that the statements that the MasterCard Zero product is the first and only
everyday credit card with no account fees are incorrect and misleading;
and

that the statement that the MasterCard Zero product has no account fees
is misleading as the inactivity fee is an account fee.
We understand Basic Principles 2 and 3 of the Code for Financial Advertising
have been identified as the Advertising Codes of Practice relevant to ANZ
National Bank's complaint.
MasterCard Zero is the first and only everyday credit card with no account fees
4.
We do not accept that the statements that the MasterCard Zero product is the
first and only everyday credit card with no account fees are incorrect or
misleading.
5.
The MasterCard Zero product became available in August 2007. We were
aware at the time we developed MasterCard Zero of the existence of ANZ
National Bank's 'Freestyle' product and of the Bank of New Zealand's 'Activator'
product, both of which are credit cards with no account fees.
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6.
We have never claimed that the MasterCard Zero product is the only credit
card with no account fees. Rather, we have deliberately promoted it as the only
everyday credit card with no account fees.
7.
We consider that the MasterCard Zero product is distinguishable on the basis
that it is designed to be used on an everyday basis, unlike the Freestyle or
Activator products. The MasterCard Zero product has been devised and
promoted as an everyday credit card. It is intended to be used by customers
on a regular basis for everyday-type purchases. The inactivity fee (a $15
charge imposed if the customer does not use the credit card for a three month
period) is designed to encourage regular use of the credit card.
8.
In comparison, ANZ National Bank's Freestyle product is promoted on its
website as a "revolving credit facility that is ideal for big ticket purchases", and
that "it's a great alternative to hire purchase". The Freestyle product is
positioned in the credit card market for purchasing large ticket items. With a
relatively low interest rate, no account fee, and a $5 fee imposed on each
purchase (up to a maximum of $10 a month), it is designed for customers who
want to make one-off purchases of expensive items.
9.
If a customer were to use the Freestyle product on an everyday basis, he or
she would likely pay $120 a year in purchase fees (being $10 a month). In
comparison, the customer would incur no such fees using the MasterCard Zero
product on an everyday basis.
10.
In contrast to its Freestyle product, ANZ National Bank promotes its Visa
Classic product for everyday use (National Bank's website describes it as "the
ideal everyday card", and states "Visa Classic is great for everyday use"). The
Visa Classic's low annual account fee ($20 per annum) and up to 55 days'
interest-free period make it a more appropriate option for a consumer wanting
to use a credit card on an everyday basis.
11.
The Bank of New Zealand's Activator product is similarly positioned to ANZ
National Bank's Freestyle product (please note that Activator is no longer
available to new customers). It is designed for customers wanting to purchase
large ticket items on a low interest basis. Customers are charged a $20 fee
each month they make a purchase. As with the Freestyle product, the Activator
product is positioned as a revolving or flexible personal loan facility on a credit
card platform.
12.
We consider there is a basis for distinguishing the MasterCard Zero from the
Freestyle and Activator products, as Kiwibank's product is specifically designed
for everyday use. The term 'everyday' is widely used by all the major New
Zealand banks (for instance, the phrase "everyday banking" is a key link on
website home pages for ASB, ANZ, Westpac, and Bank of New Zealand).
Further, it is a generic word, non-specific to banking, that is used in common
language. Members of the public understand the concept of an everyday credit
card as being one that is suitable for regular purchases of everyday items. In
this context, it is not misleading or deceptive to describe the MasterCard Zero
as the first and only everyday credit card with no account fee.
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13.
Kiwibank's statement that the MasterCard Zero product is the first and only
everyday credit card with no account fees meets the standards set in Basic
Principles 2 and 3 of the Code for Financial Advertising. The advertisement
observes a high standard of social responsibility, and the basic tenets of truth
and clarity. It does not in any way mislead, deceive, or confuse viewers.
MasterCard Zero has no account fees as inactivity fee is not an account fee
14.
ANZ National Bank has alleged that the inactivity fee on the MasterCard Zero
product "is clearly an account fee as it is a fee relating to the use and
availability of the account", so that it is misleading for Kiwibank to claim the
MasterCard Zero product has no account fees. We disagree. The inactivity fee
is not an account fee. We are justified in promoting MasterCard Zero as having
no account fees.
15.
Account fees are standard fees imposed due to an account simply being in
existence, and are charged on a regular basis. They are charged regardless of
the particular customer's behaviour and use of the account. Most of the credit
card products offered by New Zealand's major banks (ANZ, National Bank,
ASB, Bank of New Zealand, Westpac, and Kiwibank) charge an annual or six
monthly account fee (called an account fee on Kiwibank's, National Bank's,
ASB's, and Bank of New Zealand's websites, and called an account fee or
primary card fee on ANZ's website, and called an annual card fee on Westpac's
website). Further, most of the banks. also have a joint or additional cardholder
fee (usually charged on the same annual or six month basis as the account
fee).
16.
In comparison, the inactivity fee for the MasterCard Zero product is linked to
the customer's behaviour. The inactivity fee will be charged only where a
customer does not use his or her MasterCard Zero card for a three month
period. Unlike an account fee, it will not be charged on the basis that the
customer merely has an account. Rather, it is incurred as a result of the
particular customer's behaviour.
17.
Kiwibank's advertisement is not misleading to customers. It states there are no
account fees for the MasterCard Zero product, and includes a statement on
screen that other types of fees may apply. Viewers receive a clear message
from the advertisement that there are no account fees for the product, but that
other fees may be charged depending on the customer's use of the account.
18.
Kiwibank's MasterCard Zero advertisement was approved by the Television
Commercial Approval Bureau prior to its screening.
19.
Kiwibank is open about the existence of the inactivity fee. The inactivity fee is
prominently referred to on Kiwibank's website and in the hard-copy brochure for
the MasterCard Zero. Further, MasterCard Zero customers who have not used
their card for two months receive a letter from Kiwibank reminding them that
the inactivity fee will apply if the customer does not use the credit card within
the next month.
20.
Kiwibank's statement that the MasterCard Zero product has no account fees
also meets the standards set in Basic Principles 2 and 3 of the Code for
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Financial Advertising. The advertisement observes a high standard of social
responsibility, and the basic tenets of truth and clarity. The inactivity fee is not
an account fee, so the advertisement does not in any way mislead, deceive, or
confuse viewers.
21.
We are happy to answer any questions the panel members may have at the
upcoming hearing.
Television Commercial Approvals Bureau (TVCAB) said on behalf of the
Media:
This complaint revolves around two issues:

Kiwibank Mastercard Zero is the first credit card with no account fee

Kiwibank Mastercard Zero is the only everyday credit card with no
account fee.
The TVCAB accepted this advertising on the basis of information supplied, but as
always, claims such as first or only are accepted subject to challenge.
The competitive challenge has now been made to the ASCB. It appears this
challenge is based on industry interpretation of terms. If point 1 is found to be not
valid, then in all probability point 2 will fail too.
From the viewpoint of the Broadcasters and the consumer, the TVCAB stands by its
original acceptance of the advertising as being reasonable, valid and not misleading.
However, we await the Board's decision with interest.
Deliberation
The Panel confirmed that prior to this Deliberation, it had taken into account all the
submissions made in relation to the complaint. It also identified the advertisement,
which was the subject of the complaint, and the Principles against which the
advertisement was assessed.
The Chairman directed the Panel to consider the complaint with reference to Basic
Principles 2 and 3 of the Code for Financial Advertising. In this respect the Panel was
essentially required to determine whether, from the point of view of the consumer, the
advertisement strictly observed the basic tenets of truth and clarity. The Panel was
also mindful of the high standard of social responsibility required of financial
advertising, particularly, as consumers often relied on such services for their financial
security.
In the Panel’s view the complaint raised the following two issues.
1.
The validity of the statements - “Kiwibank MasterCard Zero is New Zealand’s
first everyday credit card with no account fees” and “Kiwibank MasterCard
Zero the only everyday credit card with no account fees”; and
2.
The validity of the claim that the Kiwibank MasterCard Zero product has no
account fees ("zilch, zip, not a sausage, zero").
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The Panel considered the issues in relation to Basic Principle 3.
The first issue for the Panel was whether Kiwibank MasterCard Zero was the
first/only everyday credit card … with no account fee.
The Panel noted the Advertiser’s submission that at the time it developed the
Kiwibank MasterCard Zero product it was aware of the existence of “other” credit
cards on the market that incurred no account fees. Therefore the only feature, which
could actually distinguish the Kiwibank MasterCard Zero from other credit cards with
no account fees, was the use of the word “everyday”. The Panel also acknowledged
the Advertiser’s submission that the use of the word ‘everyday’ in this context was
generic and not a term specific to banking.
The Panel contemplated the use of ‘cards’, generally, in the community. It
recognised that there were numerous cards available for use in different ways and for
different circumstances. In the Panel’s view, ‘cards’ were an integral part of most
peoples’ lives. So much so that it was unnecessary to describe the categories or list
the differences. However, it was this innate awareness and acceptance associated
with the use of ‘cards’ that, in the Panel’s view, undermined the unique and
identifying features associated with Kiwibank’s MasterCard Zero. In other words
consumers used all sorts of cards everyday regardless of the cards specific
application. In the Panel’s opinion, there was no specific ‘everyday’ category uniquely
identifying the use of a credit card. Rather, a card’s uniqueness, for want of a better
word, was simply dependent on consumer usage. Not on an artificial label.
Accordingly, the use of the word ‘everyday’ in the context Kiwibank MasterCard Zero
was the first/only everyday credit card … with no account fee, was simply too subtle
a distinction, particularly when compared to other card products on the market.
Accordingly, the Panel ruled that, in this respect, the advertisement did not strictly
observe the basic tenets of truth and clarity as required by Basic Principle 3 of the
Code for Financial Advertising and as such was in breach of the provision.
The Panel then turned to the issue relating to the validity of the claim that the
Kiwibank MasterCard Zero has no account fees ("zilch, zip, not a sausage, zero").
It considered, in particular, the “inactivity fee” both in relation to the claim, and the
graphic “Service fees may apply”. It also looked at the structure of the account and at
the compulsory versus optional nature of the fees.
However, despite the Advertiser’s explanation for the “inactivity fee”, it was the
Panel’s opinion that the consumer was most likely to associate it, with the payment of
the fee generally associated with obtaining and/or using a credit card. In other words,
a general fee that enabled the user to access the credit, which was rebated if the
account was used appropriately. The Panel also considered the broad nature of fees
charged by banks for various functions. In this respect, rather than bothering to
identify specific categories, it was the Panel’s opinion that the consumer did not
necessarily differentiate. In the eyes of the consumer, a fee was a fee regardless of
its derivation. With this in mind, the Panel concluded that there was insufficient
disclosure of the “inactivity fee” which was, in effect, a condition that could reduce the
value of the offer if the credit card was not used in accordance with the bank’s
requirements. This requirement for disclosure has been adhered to in adjudications
since 1990 and was set out in Decision 94/90.
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Accordingly, the Panel ruled that in this respect the advertisement breached Basic
Principle 3 of the Code for Financial Advertising by not strictly observing the basic
tenets of truth and clarity.
As an overriding principle, financial advertisements are also required to observe a
high standard of social responsibility particularly as consumers often rely on such
services for their financial security. The Panel concluded that by virtue of being in
breach of Basic Principle 3 of the Code, the advertisement also failed to reach the
high level of social responsibility expected in financial advertising. Accordingly, the
advertisement was in breach of Basic Principle 2 of the Code for Financial
Advertising.
Having made these observations, the Panel ruled to uphold the complaint.
Decision: Complaint Upheld