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Thursday 3 July 2014

14-149MR GE Capital Finance Australia hit with $1.5 million penalty over false or misleading representations

The Federal Court has made declarations and ordered consumer credit provider GE Capital Finance Australia, which trades as GE Money, pay a penalty of $1.5 million for making false or misleading representations to more than 700,000 of its credit card customers.

The court found that at various times between 5 January and 27 May 2012, GE Capital told certain credit card customers that to activate their credit card, or apply for or obtain an increased credit limit, the customer also had to consent to receiving invitations to apply for credit limit increases.

These representations were false or misleading because GE Capital did not require such consent for credit cards to be activated or for credit limits to be applied for or increased. GE Capital engaged in the conduct shortly before the Government’s prohibition on unsolicited invitations to increase credit card limits came into effect.

The court found that, ‘the contraventions were serious and the reach of GE Capital’s conduct was extensive and substantial [and that it] was a systematic and deliberate attempt to mislead cardholders into giving their consent to receive invitations for future credit increases so as to avoid losses of up to $6 million which were projected to be suffered by GE Capital as a result of the tightening regulatory environment.’

ASIC Deputy Chairman Peter Kell welcomed the decision and said, ‘This ruling serves as a reminder that there are important safeguards to help consumers manage their debt levels. If businesses seek to side-step these, ASIC will not hesitate to use its powers to protect consumers.’

In imposing a penalty of $1.5 million, the court said, ‘What was involved was an attempt to obtain consents in an unlawful manner, and the adoption of a cynical approach by seeking to make the cardholders’ choices less straightforward.’

The court also made orders requiring GE Capital to pay ASIC $50,000 for its costs and to advise cardholders what the decision means for them by sending emails or letters to approximately 210,000 affected cardholders and by publishing a notice on its website.

During the court proceedings, GE Money admitted to breaking the law.

In determining its penalties, the court took into account GE Capital’s level of cooperation with ASIC’s investigation as mitigating the seriousness of the contravention.

Download

Federal Court judgment

Background

ASIC launched its legal action against GE Capital Finance Australia in October 2013 (refer: 13-280MR).

Affected credit cards included Myer and Coles branded credit cards and also cards such as 28 Degrees MasterCard, GE Creditline, AFS Creditline, Buyer’s Edge, GE Money Eco MasterCard, GE Money MasterCard, GE Money Low Rate MasterCard, GO MasterCard, and Gem Visa.

Last updated: 03/07/2014 12:00