The Federal Court today ruled Latitude Finance Australia and Harvey Norman Holdings Ltd engaged in misleading conduct and made false or misleading representations in relation to a widespread advertising campaign for a 60-month interest free and no deposit payment method.
ASIC was concerned the advertisements masked the fact consumers were required to take out a credit card, such as the Latitude GO Mastercard, to purchase goods. The advertisements were published between January 2020 and August 2021.
ASIC Deputy Chair Sarah Court said, ‘ASIC took this case because we believed many consumers may have been unaware of the financial arrangements they were entering into when they bought everyday products at Harvey Norman stores. In some cases, this may have meant they paid considerably more for purchases than they expected.'
‘The financial obligations under a credit card are different to what was advertised by Harvey Norman. A continuing credit contract can involve multiple advances of credit together with monthly account service fees and high interest rates, all of which add up for consumers.
'Consumers deserve to be fully informed so that they can consider their current financial position and decide if a credit card is the appropriate product for them.’
ASIC alleged in the proceedings that Latitude and Harvey Norman contravened the ASIC Act by pursuing a national advertising campaign in newspapers, and on radio and on television stations across Australia, which ASIC alleged failed to adequately disclose the true scope and cost of the promoted payment method.
The Court found the advertisements’ statement of the payment method was presented as a complete statement, when it was far from complete.
Justice Yates found that ‘consumers who wished to make such a purchase had to enter into a fundamentally different financial arrangement than the one promoted - namely, a continuing credit contract with Latitude that was linked to a credit card (the GO Mastercard), whether or not they wanted a credit card (let alone a GO Mastercard), which required them to pay an establishment fee and ongoing monthly account service fees in respect of that linked account.’
ASIC will seek relief including pecuniary penalties against Latitude and Harvey Norman.
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Background
ASIC alleged that, between January 2020 and August 2021, Harvey Norman and Latitude, contravened sections 12DA, 12DB and 12DF of the ASIC Act by pursuing a national advertising campaign in newspapers, and on radio and on television stations across Australia, which failed to adequately disclose the true scope and cost of the promoted payment method. ASIC alleged that the advertisements failed to disclose that, to use the interest free payment method, consumers had to have, or apply for and be approved for, an eligible Latitude credit card and use that credit card or the account linked to it to purchase the goods, and that consumers were liable to incur an associated establishment fee (until 15 March 2021) and monthly account service fees (if the statement balance was $10 or more).
ASIC’s Regulatory Guide RG 234 is for promoters of financial products, financial advice services, credit products and credit services, and publishers of advertising for these products and services. RG 234 contains good practice guidance to help promoters comply with their legal obligations not to make false or misleading statements or engage in misleading or deceptive conduct.
Since 5 October 2021, new design and distribution obligations have applied. These obligations require issuers and distributors of financial products to help consumers obtain appropriate financial products by taking a consumer centric approach when designing and distributing their products. More information is available in ASIC Regulatory Guide RG 274.
ASIC’s Moneysmart website has information for consumers about the real costs of interest free deals and how to find help to get debt under control.
Example of an extract of one of the newspaper advertisements
The Adelaide Advertiser, Thursday 23 April 2020.
