Ta Chong Commercial Bank Co., Ltd. made
misleading representations in advertisements for its “Much” cash card, claiming
“no processing fees” and “no service charge”
Chinese Taipei
Case:
Ta Chong Commercial Bank Co., Ltd. made misleading representations in advertisements for its “Much” cash card, claiming “no processing fees” and “no service charge”
Key Words:
processing fee, service charge, misleading
Reference:
Fair Trade Commission Decision of December 18, 2003 (the 632nd Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 092186
Industry:
Domestic Banks (6212)
Relevant Law:
Article 21 of the Fair Trade Law
Summary:
1. This case originated from a citizen complaint regarding advertising beginning in December of 2002 by Ta Chong Commercial Bank Co., Ltd. (Ta Chong) for its “Much” cash card on television and in the print media. The advertising claimed that “only an ID” was required for members of the public to apply for the card, and while claiming “no processing fee,” applicants were still required to pay NT$100 for a credit check, which was obviously still a fee connected with initial application procedures. It was alleged that the advertising was obviously false, in likely violation of Article 21 of the Fair Trade Law.
2. After its investigation, the Fair Trade Commission (FTC) found that there was no explicit definition or uniform policy among banks with regard to “processing fees” or “credit check fees” in connection with newly-opened lines of credit, nor were there any Ministry of Finance regulations regarding types or amounts of fees to be collected by banks. Currently some banks collect neither processing fees nor credit check fees, while others collect both; still others collect no processing fees but do collect account management fees. Charging a credit check fee to loan applicants is a common commercial practice among banks when processing loan applications, and cash cards are a part of their small-loan business. In processing applications for cash cards, banks need to carry out credit checks on customer creditworthiness and card application status with the Joint Credit Information Center, clearing houses, or other institutions, and have to pay a fee to do so. In order to ascertain customers' future solvency and extend credit, and in line with the common principle in the loan business that fees are borne by the customer, Ta Chong's collection of NT$100 does not, based on current evidence, seem to be at odds with its advertising presentation. With regard to whether the Ta Chong advertising claims of “no processing fees” and “no service charge” were misleading, consideration was given to current methods of handling card applications and standards of financial management. It was found that there were no explicit definitions or limitations on the meanings of “processing fees” or “service charge,” and Ta Chong did not deny that a credit check fee was in fact related to the card application process; an investigation of fees collected by nine other banks besides Ta Chong found that only one of the nine charged a credit check fee, and only one of the nine charged an processing fee. Therefore, given general market practices, and an overall assessment of Ta Chong's television and newspaper advertising and the information in its application form, an applicant would easily form the perception, based on the claims of “no processing fees” and “no service charge,” that one only needed an ID and would not be required to pay any fees whatsoever. Neither did Ta Chong state in its television or newspaper ads that an NT$100 fee would be collected for credit checks, nor did its application form contain the information that “at the time of application for a cash card, an NT$100 credit check fee will be charged.” Thus Ta Chong's emphasis on the special incentives of “no processing fees” and “no service charge” in its promotions, without any clear statement that an extra NT$100 credit check fee would be charged, was indeed false and misleading, in violation of Article 21 of the Fair Trade Law.
3. Based on investigation, Ta Chong's emphasis on the “no processing fees” and “no service charge” incentives in its advertising for the “Much” cash card, while at the same time failing to clearly note that an NT$100 credit check fee would apply, was a misleading representation in violation of Article 21 of the Fair Trade Law. In consideration of Ta Chong's motives for its unlawful conduct, the degree of damage caused, the circumstances of its violation, the scale of its business, and its attitude subsequent to the violation, the FTC ordered Ta Chong to immediately cease its unlawful conduct and imposed an administrative fine of NT$200,000 in accordance with the fore part of Article 41 of the Fair Trade Law. Further, to guard against the possibility of any future instances of bank advertising for cash cards in violation of Article 21 of the Fair Trade Law, the Ministry of Finance was requested to notify the various banking industry associations and their member banks to avoid false or misleading representations by clearly disclosing any fees, their purposes, and their amounts in any future advertising for cash cards touched upon the issue of fee collection.
Appendix:
Ta Chong Commercial Bank Co., Ltd.’s Uniform Invoice Number: 86521079
Summarized by Lai, Mei-Hua; Supervised by Yeh, Ning