The lure of easy money
THIS week I’ve had my nose bloodied.
On Sunday consumer group CHOICE launched their ‘One Big Switch’ campaign to encourage 1,000 battlers to band together and use their collective buying power to get a better deal.
It was an easy sell to the press: consumer watchdog CHOICE was helping everyday people rising up against the greedy banks. The news stories practically wrote themselves. Some called it ‘a world first’, others publications gushed that ‘it was a way to get everyday mums and dads millionaire rates’.
But it was all a bunch of rubbish.
The idea that you can ‘group buy’ a home loan for thousands of people is ridiculous. Anyone who has applied for a mortgage knows the bank determines your rate by taking into account your personal income, equity, and credit history.
The real story, that no one picked up on, is that consumer group CHOICE has sold its soul. They have joined forces with a slick sales outfit to share in the kickbacks that the banks will pay them for each punter they put through – and they’ve got lots of them lining up because of the gushing publicity.
Even on the most conservative mortgage industry standard pay rates the One Big Switch Campaign will generate tens of millions of dollars in commissions, which they’re keeping for themselves.
I’ve always argued that it’s in the consumers best interests to go to a mortgage broker who refunds these kickbacks straight on to your loan – doing so can save you up to $40,000 in interest over the life of your loan. How good is that?
Until last month CHOICE, the consumer watchdog, agreed. They even issued a press release that’s headline read: ‘Signs of brighter financial advice future, paying up-front will avoid dollar-draining commissions’.
Nothing — except they are now on the verge of copping a multi-million dollar commission cheque themselves.
When I questioned CHOICE spokesman Christopher Zinn about the matter he replied that ‘the CHOICE business model is changing’, and ‘one-day the subscription revenue they receive will dry up, so we need to find additional sources of revenue’.
But it’s a shame those additional sources of revenue come indirectly from the pockets of the people they claim to be protecting. They buried that fact on their website, before bringing it out when they started getting grief from people like me – and a few of their own savvy subscribers.
I copped quite a lot of flak over being a killjoy of the bank-bashing party. Zinn and I traded (verbal) blows over the phone, before he finally said “look, if we can’t get the consumer a better deal, they won’t take it – simple as that”.
What a complete cop out.
Consumers know the finance industry is crooked, and that’s why they look to organisations like CHOICE to give them independent information. But with this sleazy stunt, CHOICE is now not only part of the problem – it’s on the payroll.
Tread Your Own Path!
Scott Pape (aka The Barefoot Investor) can be contacted atwww.barefootinvestor.com