Meeting 12 August 2008
Complainant: S. Hood
Advertisement: MARAC Finance Limited
Complaint: The website advertisement displayed a banner type heading which
contained the message:
“The only rate you
should be looking for.”
Beside this message was an image affirming that Marac Finance Limited had an
“INVESTMENT GRADE RATING” of BBB- from “STANDARD & POORS”.
Complainant, S. Hood, said:
“I wish to lodge a complaint regarding Marac Finance's website advertisement.
On the main page it makes the following two statements:
1. "The only rate you should be looking for” and
2. "INVESTMENT GRADE RATING", with regards its BBB- credit rating.
I find these two statements regarding Marac Finance as serious misleading, and
untruthful in nature. Given the turbulent time in the finance industry, such advertising
statements must be held to a very high standard.
With regards to "The only rate you should be looking for" this implies that the BBB-
Standards & poor credit rating is the only rate you should be looking for. This clearly
implies that the BBB- rating is a secure investment.
However, BBB- is the very bottom rating (the top is AAA) out of 10 Investment Grade
Ratings. In fact this rating is so marginal, that if Standard & Poor's in the future
downgrade it's rating for this firm by just 1 grade (to BB+), it then joins the ranks of
the Speculative Grade Ratings, which are obviously far less secure, and joining such
a class in the future could risk it having a run on its deposits by its investors,
threatening the viability of this company.
With regards to the claim that it is Investment Grade Rating, it should point out that
the current rating is so marginal that the next rating down is effectively non
If Marac want to accurately describe their Investment Grade Rating, then they should
use the term "Marginal” or similar, rather than describe it as Investment Grade.”
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
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.
Legal Counsel for the Advertiser, MARAC Finance Limited, said:
1. We act for MARAC Finance Limited and have been instructed to respond to
your letter of 15 July 2008 and the complaint of S. Hood of 30 June 2008 on its
2. Our client was surprised to receive this complaint and is of the view that it is
able to be disposed of on its face. MARAC takes its obligation as a responsible
and leading participant in the financial products market seriously and has
accordingly retained us to deal with this matter.
3. We note that under the procedures of the Authority "The Chairperson will
determine whether the complaint is suitable for the Board's consideration ...".
We would have thought that in cases like the present one the Chairperson
would have been able to exercise discretion and not put an advertiser to the
trouble and expense of requiring a formal response.
4. The complainant seems to complain that MARAC in highlighting its BBB- credit
rating and stating that it was "the only rate you should be looking for" was
misleading in terms of principle 3 of the Code for Financial advertising. This is
5. MARAC is one of the few finance companies which has taken the step of
obtaining an independent credit rating. This shows a commitment to
transparency and providing clear and independent information to the market. It
is therefore quite accurate to say that the credit rating is "the only rate you
should be looking for". That statement is making the very valid point that
interest rates are largely irrelevant if the consumer has no information as to the
creditworthiness of the deposit taking institution.
6. The complainant appears also to complain that the advertisement reproduces
the Standard and Poor's description of a BBB- credit rating as Investment
Grade. This aspect of the complaint is also ill founded. The statement, far from
being misleading in any way is providing accurate and independent information
to consumers of financial products. Investment Grade is the opinion of
Standard and Poor's and as such a valuable informational point that ought to
be provided to depositors.
7. The complainant seems to consider the fact that BBB- is at the lower end of the
investment grade scale to be relevant. It is not. If MARAC were to lose its BBB-
rating and it ceased to have an investment grade rating it would obviously
cease using this in any advertising material. The complainant seems to miss
the point that ratings are put into grade classes for a reason - namely that in
the view of the rating agency the deposit taking entity is of that grade. It is
illogical to suggest that MARAC should cease informing its potential depositors
of the grade of its BBB- rating.
8. The complainant suggests that MARAC should add to the rating the word
"marginal' or words to similar effect. MARAC does not propose to add words
reflecting the opinion of the complainant or any other third party to the rating
given by an internationally recognised rating agency. The opinion of Standard
and Poor's is highly respected, thoroughly researched, and quite able to stand
without addition or amendment.
9. The complaint is further difficult to comprehend given the fact that the
advertisement was found on our client's internet site which also contained
comprehensive information on the rating framework and links to further
information about Standard and Poor's ratings (which we enclose for your
information). That information is available by clicking on the advertisement.
Indeed the information available with the advertisement even included a
diagram showing the Standard and Poor's rating schedule and where on that
schedule a BBB- rating lies. That makes it clear that the next lowest rating
(BB+) is a speculative grade rating. Standard and Poor's BBB- includes an
outlook statement of Stable and therefore likely downgrades are not foreseen
by Standard and Poor's at the time of rating.
10. We have made clear our view that this complaint is frivolous and utterly without
foundation. We are disappointed that the Authority does not appear to have a
preliminary procedure in place by which complaints which are on their face not
sustainable can be either rejected, or considered and disposed of without
putting responsible market participants to the trouble and expense of dealing
with vexatious complaints.”
The Complaints Board read thoroughly the relevant correspondence and reviewed
the advertisement. It note Complainant, S. Hood, was of the view that the two
statements, "The only rate you should be looking for” and "INVESTMENT GRADE
RATING", which was referenced to a BBB- Standards & Poors credit rating, did not
observe a high standards of social responsibility and were misleading to the
The Acting Chairman directed the Complaints Board to consider the complaint with
reference to the Code for Financial Advertising, Basic Principles 2 and 3.
As such the task before the Complaints Board was to ascertain whether the
advertisement observed a high standard of social responsibility required by Basic
Principle 2, particularly as the product could affect a consumer’s financial security.
Basic Principle 3 stated the need for financial advertisements to strictly observe the
basic tenets of truth clarity and not by exaggerated claim or hyperbole mislead or
In making its determination the Complaints Board considered the product, audience
and context relevant to the advertisement.
The Complaints Board took into account the profile of the likely consumer, which
would include the “mum and dad” investor. It referred to Complaints Board Decision
93/105 where the deliberation said,
“… the Board was mindful of the test it had adopted in identifying the
comprehension level of consumers which was the test in World Series Cricket Pty
Ltd v Parish. Applying that test consumers included the “…knowledgeable, and
those who are not, the superficial reader, viewer or listener, as well as the profound,
the gullible as well as the cautious…”.
It then considered the category of the investment vehicle offered, which by its nature
was subject to market forces. It turned to the advertisement where the banner
heading contained the absolute claim, “The only rate you should be looking for”. As
the BBB- rate given by Standards & Poors was in fact at the base of the “Adequate”
“Investment grade ratings” category, the majority of the Complaints Board was of the
view that the claim in association with the reference to the BBB- Standard & Poors
credit rating, contained a level of hyperbole and exaggeration and did not strictly
observe the basic tenets of truth and clarity. The majority was of the view that it was
likely to mislead and exploit the lack of knowledge of consumers, and thereby
breached Basic Principle 3.
The majority cautioned that the investment industry in particular, had a duty to be
very careful with the use of language in their advertisements.
The majority also said the advertisement before it did not observe the high standard
of social responsibility required in advertisements for financial products, and ruled
that it was in breach of Basic Principle 2.
The minority of the Complaints Board disagreed, expressing the view that MARAC
Finance was entitled to advertise their 31 March 2008 Standard & Poors Rating of
BBB-along with the phrase “The only rate you should be looking for”. The minority
noted the response of Counsel for the Advertiser where it stated “MARAC is one of
the few finance companies which has taken the step of obtaining an independent
credit rating.”. Accordingly, the minority said the heading was not likely to mislead the
consumer and the advertisement was not in breach of Basic Principle 3. In the
minority view the advertisement also met the requirements of Basic Principle 2.
Turning to the issue of the inclusion in the advertisement of the symbol with the
wording “Investment Grade Rating” Standard & Poors and BBB-, the majority of the
Complaints Board said the Advertiser was entitled to include that reference as it was
factual and thereby not misleading or in breach of Basic Principle 3. Furthermore, the
majority took into account that the advertisement as a whole explained the nature of
the rating, both the status of Standard & Poors, and the meaning of BBB-, and it was
thereby of the view that the advertisement met the high standard of social
responsibility required by Basic Principle 2.
A minority of the Complaints Board disagreed and considered that the use of the
BBB- credit rating did not meet the requirement for a high standard of social
responsibility and could mislead the consumer with regard to the level of security
provided in relation to the investment.
However, in accordance with the majority view the complaint was not upheld in
relation to the part of the advertisement where it said “Investment Grade Rating
Standard & Poors and BBB”.
In accordance with the majority view where it ruled that the claim “The only rate you
should be looking for.” in the advertisement breached Basic Principles 2 and 3 of the
Code for Financial Advertising, the Complaints Board ruled to uphold the complaint
Decision: Complaint Upheld (in part)