A leading lawyer in financial services regulation has warned brokers to ensure that any promotions they run to incentivise consumers to take out home loans are legal.
Speaking to The Adviser, Jon Denovan, partner at Gadens law firm and honorary member of the Mortgage & Finance Association of Australia (MFAA), said that although promotions have “existed for every sales activity”, for “enticements to enter into mortgages, there is a fine line to tread”.
Mr Denovan said that brokers offering competition lotteries should ensure that they hold the relevant lottery licences before offering such enticements.
He said: “Brokers need to be aware of the fact that if you are having something that is not a game of skill, so it is simply a promotion and you could win something, then that is a lottery and you have to have a licence in some states to do it.
“You often see it in promotions that there is a licence number quoted — and that's not the credit licence, but a licence to conduct lotteries or conduct a competition. That's why sometimes these sorts of promotions are games of skill, even if that's simple, like spelling the word 'cat'.”
His comments come as more brokers seek to edge out the competition by offering clients once-in-a-lifetime experiences, such as PropertyFinance.online’s offering of driving a Ferrari 380 Italia to those looking to find a better mortgage.
The offer, which runs until 31 August, is legal as it is offered to anyone that submits their details — whether or not the brokerage is able to find a better home loan, and even if the customers’ loan is still suitable and not in need of a refinance.
Mr Denovan said: “There's nothing illegal about these type of marketing ploys, as long as it doesn't affect your performance as a broking service. But if you’re offering a lottery, then you must check that you hold the right licences.”
Vicki Bailey, founder and director of PropertyFinance.online, said of the Ferrari offer: “It’s the whole idea of doing something that you wouldn’t normally do. It’s outside the realm of what most people would even think about. It’s a bit outside the box, and that’s what made us go for that.”
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