|
bogarde73
|
Woolworths reminded it isn't a bank
DateJuly 24, 2014 - 8:18AM
Jared Lynch
Business reporter
Woolworths might offer financial services but it can't call itself a bank.
Woolworths might offer financial services but it can't call itself a bank.
Woolworths has been forced to stop using the word ‘‘banking’’ in the marketing of its financial services after it fell foul of regulators.
The move is a setback for the retailer as it steps up its aggressive push into financial services, including credit cards and insurance.
Use of words related to banking is tightly controlled under financial industry laws.
Use of words related to banking is tightly controlled under financial industry laws.
It is illegal for companies to use the words "bank", "banker" or "banking" to describe their businesses unless they hold a banking licence from the Australian Prudential Regulation Authority (APRA).
Fairfax Media understands that APRA is probing Woolworths, which doesn’t have a banking licence, after it labelled its credit card business as a banking service on its website.
A Woolworths spokeswoman conceded the company had made a mistake.
“We acknowledge we were using the wrong term and this will be rectified,” the spokeswoman said.
The admission came as rival Coles said it was considering becoming a member of the Financial Services Council, giving it a seat at the table among the nation’s leading wealth managers. Coles announced earlier this month that it planned to start issuing personal loans within the next 12 months as part of its own push into financial services.
APRA aggressively polices use of the word ‘bank’, launching several legal actions in recent years to either shut down operations or freeze funds.
The most famous occured when receivers took control of about $5 million raised by David Siminton after the Federal Court found he had set up an unregistered bank in his self-proclaimed "principality of Camside".
The regulator has also been tightening its guidelines about who can be called a bank after rural lender Banksia collapsed in late 2012, owning $660 million to thousands of mum-and-dad investors.
'Careless' claim
Consumer advocate group CHOICE described Woolworths’ actions as “careless” and said they were concerning if they signalled the way the Fortune 500 company would handle its foray into financial services.
“We have seen supermarkets moving aggressively into financial products and they need to be careful as they do that," CHOICE director of campaigns and communication Matthew Levey said.
"It’s a highly regulated environment with a lot of consumer protections that exist for very good reasons.
“The risks associated with a financial product, particularly a credit product, are very different to those associated with buying food and groceries at a supermarket.”
But Mr Levey was far from critical of the supermarkets’ plans to ramp up financial services.
"There is a certain irony in having players from arguably the most concentrated sector in Australia turn their attention to one of the next most concentrated, to have the big two take on the big four [banks]," he said. "But if they bring good products to the market that could bring a whole range of benefits.”
No blurring
Greens’ consumer affairs spokesman Senator Peter Whish-Wilson said he was concerned.
He slammed Woolworths for describing its credit card business as a banking service.
“A bank is a bank is a bank,” the former investment banker said. “There should be no blurring.”
Senator Whish-Wilson said the supermarkets’ expansion into financial services could lead to sales-driven advice, particularly after the federal government weakened consumer protection provided by the Future of Financial Advice laws.
“I am worried about customers being pushed products that aren't in their interest. We want to see more independent financial planners, not vertically-integrated sales-based businesses.
“I am also worried that supermarkets will be using financial services to cross-subsidise their grocery business and increase their market power in this sector further.”
Senator Whish-Wilson called on the Australian Competition and Consumer commission to “be watchful in this area, like they were with petrol discounts”.
Competition warning
The boss of Metcash’s $9 billion grocery division - which includes IGA, Foodland, Foodworks and Lucky 7 branded stores – this week warned Coles and Woolworths’ moves into financial services posed a serious threat to competition.
“Why would they be allowed to do that?" he asked.
"Are they going to use that to leverage across the market? Of course it’s a concern,” said Fergus Collins, who in December was elevated from running wholesaler Metcash’s liquor distribution arm to head its flagship supermarkets business.
|
Forum
Pages: 1
Woolworths hauled over the coals (Read 802 times)
