I found this on the Australian web site - interesting times. the link is at the bottom...
Ecogirl
Anna Fenech
September 17, 2004
LOAN calculators on more than 100 home lender websites have been shut down because they are deliberately misleading customers.
ASIC has ordered the calculators be pulled off the websites of all banks, credit unions and mortgage brokers because they falsely suggest these loans will help consumers pay off their home loans faster.
Line-of-credit loans with salary crediting are widely marketed by lenders and brokers as an easy way to pay off a home loan quickly or as a debt-reduction strategy.
Typically this is because the borrower's salary is credited to the borrower's home loan for a month, temporarily reducing the loan balance, and therefore the interest payable. During the month the borrower uses a credit card for expenses, then uses the loan account to pay it off each month.
What is not mentioned in the sales pitch is that the interest rate on a line of credit is usually higher than on a standard home loan, so the consumer pays higher home loan repayments than before.
"It's false, misleading and extraordinary to suggest that one facility which involves paying higher interest could pay off a home loan sooner," said Greg Tanzer, ASIC executive director, consumer protection.
He said the regulator had acted in response to mounting consumer complaints and after surveillance of mortgage brokers' activities.
In addition, line-of-credit loans are interest only, with no set term, so the borrower can decide when they want to repay the loan principal. If they find it hard to budget, they can end up years later with a bigger loan than when they started.
Standard loans make borrowers pay principal and interest over a set loan term.
Mr Tanzer said the calculators did not clearly state that a higher interest rate may apply on a line of credit, nor that any reduction in a line-of-credit loan would happen because of the borrower deciding to make greater repayments than before.
link
Ecogirl
Anna Fenech
September 17, 2004
LOAN calculators on more than 100 home lender websites have been shut down because they are deliberately misleading customers.
ASIC has ordered the calculators be pulled off the websites of all banks, credit unions and mortgage brokers because they falsely suggest these loans will help consumers pay off their home loans faster.
Line-of-credit loans with salary crediting are widely marketed by lenders and brokers as an easy way to pay off a home loan quickly or as a debt-reduction strategy.
Typically this is because the borrower's salary is credited to the borrower's home loan for a month, temporarily reducing the loan balance, and therefore the interest payable. During the month the borrower uses a credit card for expenses, then uses the loan account to pay it off each month.
What is not mentioned in the sales pitch is that the interest rate on a line of credit is usually higher than on a standard home loan, so the consumer pays higher home loan repayments than before.
"It's false, misleading and extraordinary to suggest that one facility which involves paying higher interest could pay off a home loan sooner," said Greg Tanzer, ASIC executive director, consumer protection.
He said the regulator had acted in response to mounting consumer complaints and after surveillance of mortgage brokers' activities.
In addition, line-of-credit loans are interest only, with no set term, so the borrower can decide when they want to repay the loan principal. If they find it hard to budget, they can end up years later with a bigger loan than when they started.
Standard loans make borrowers pay principal and interest over a set loan term.
Mr Tanzer said the calculators did not clearly state that a higher interest rate may apply on a line of credit, nor that any reduction in a line-of-credit loan would happen because of the borrower deciding to make greater repayments than before.
link
