The Federal Court has ruled that Latitude Finance Australia and Harvey Norman Holdings Ltd engaged in misleading and deceptive conduct through a widely promoted advertising campaign that offered a 60-month interest-free payment plan with no deposit. The campaign, which ran between January 2020 and August 2021, was found to have concealed crucial details about the financial arrangement, including the requirement to take out a credit card.
The Australian Securities and Investments Commission (ASIC) argued that the advertising misled consumers by
failing to adequately inform them that they would need to apply for and be approved for a credit card, such as the Latitude GO Mastercard, to take advantage of the payment plan. This omission, ASIC contended, potentially led to consumers paying more than they had anticipated.
ASIC Deputy Chair Sarah Court expressed concern that many customers were unaware of the full financial implications of the payment method. "In some cases, consumers may have paid considerably more for their purchases than they expected," Court stated. "A credit card, particularly a continuing credit contract, involves various financial obligations such as establishment fees, ongoing monthly service fees, and high interest rates, none of which were made clear in the advertisements."
The court found that the advertising campaign, which ran across newspapers, radio, and television, had misrepresented the payment plan as straightforward and complete, when in fact, it required customers to enter into a credit contract with Latitude, tied to a credit card. Justice Yates noted that customers were not fully informed of the credit arrangement, which involved fees and ongoing obligations that were not clearly disclosed in the promotional materials.
ASIC alleged that both Harvey Norman and Latitude contravened several sections of the ASIC Act by failing to provide consumers with the full picture of the costs and conditions associated with the interest-free payment option. The regulator also highlighted that consumers who took advantage of the promotion were subject to ongoing monthly account service fees if their balance exceeded $10, in addition to an establishment fee before March 2021.
ASIC has announced it will seek penalties against both companies. The ruling underscores the importance of transparency in advertising, particularly for financial products. Consumers, ASIC emphasised, must be fully informed about the financial commitments they are entering into to make sound decisions based on their financial circumstances.
This case serves as a reminder for businesses to ensure their advertising complies with regulatory guidelines. ASIC’s Regulatory Guide (RG 234) provides specific guidance for promoters of financial and credit products to avoid making misleading statements. Furthermore, since October 2021, new design and distribution obligations have been in place to help ensure that financial products are appropriately matched to consumers' needs.
As ASIC continues to enforce these standards, businesses must prioritise consumer-centric approaches in both product design and marketing to avoid breaching regulatory requirements.
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