On 18 October 2024, the Australian Federal Court in its judgment ruled that Harvey Norman Holdings Ltd and Latitude Finance Australia engaged in misleading conduct and made false or deceptive representations in relation to a widely promoted 60-month interest-free and no deposit payment method. The ruling stems from a complaint brought forward by the Australian Securities and Investments Commission (ASIC), which argued that the advertising campaign failed to disclose the full terms and conditions of the promoted payment method, leading to consumer misunderstanding.
The advertisements in question were run by Harvey Norman and Latitude between January 2020 and August 2021 across various media outlets, including newspapers, radio, and television. These advertisements promoted an interest-free payment method for consumers purchasing goods from Harvey Norman stores, but ASIC alleged that the ads obscured crucial information. The issue at hand was that consumers were not clearly informed they would be required to apply for and use a Latitude GO Mastercard or another eligible Latitude credit card to take advantage of the interest-free payment option.
ASIC raised concerns that the financial implications of obtaining the credit card were not adequately disclosed. Consumers were likely unaware that they would be entering into a continuing credit contract that involved various fees, including establishment fees (until March 2021) and ongoing monthly service fees, which would apply if the statement balance exceeded $10. These details, ASIC argued, were important for consumers to understand the true cost of the “interest-free” offer.
In response to the ruling, ASIC Deputy Chair Sarah Court remarked, “ASIC took this case because we believed many consumers were unaware of the financial arrangements they were entering into when purchasing products from Harvey Norman. In some cases, this could have led to consumers paying significantly more than expected.” She added that consumers deserve full transparency regarding financial products to assess whether such agreements, including credit cards with high interest rates and fees, align with their financial needs.
Australian Federal Court held that while the advertisements presented the payment method as a straightforward interest-free plan, they failed to disclose the ongoing financial obligations attached to the required credit card. She reiterated that credit card contracts often involve multiple advances of credit, and with fees accumulating monthly, consumers could end up paying far more than they originally anticipated.
Justice Yates, presiding over the case, agreed with ASIC’s assertions. The Court found that the advertisements misleadingly presented the payment method as complete and straightforward when, in reality, consumers had to enter into a much more complex financial arrangement. Justice Yates noted, “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 linked to a credit card, whether or not they wanted a credit card.”
This contract required consumers to pay fees beyond the advertised “interest-free” terms, including establishment fees and monthly account service fees, which were not clearly communicated in the advertisements. As a result, the Court ruled that both Harvey Norman and Latitude had breached several provisions of the ASIC Act, including Sections 12DA, 12DB, and 12DF, which relate to misleading or deceptive conduct and false or misleading representations.
Following the ruling, ASIC will seek pecuniary penalties and other relief against both Harvey Norman and Latitude. This case highlights the importance of transparency in financial product advertising and reinforces the need for companies to fully disclose all relevant terms and conditions to consumers.
ASIC’s Regulatory Guide RG 234 provides guidelines to help promoters of financial and credit products avoid making false or misleading statements. The ASIC’s efforts to protect consumers through the introduction of Design and Distribution Obligations (RG 274) that took effect in October 2021. These obligations require issuers and distributors of financial products to take a consumer-centric approach, ensuring that financial products are designed and distributed in ways that help consumers obtain appropriate products for their needs. ASIC provides educational resources, including through its Moneysmart website, where consumers can learn more about the hidden costs associated with “interest-free” deals and find advice on managing debt.
(Source: https://download.asic.gov.au/media/u2sf1jgw/24-228mr-asic-v-latitude-finance-australia-judgment.pdf, https://asic.gov.au/about-asic/news-centre/find-a-media-release/2024-releases/24-228mr-court-rules-harvey-norman-and-latitude-advertising-misled-consumers/?altTemplate=betanewsroom)
