Harvey Norman and Latitude hit with $55m in total penalties for misleading interest-free advertising

Harvey Norman Holdings (ASX: HVN) and Latitude Finance Australia have been ordered to pay combined penalties of $55 million after the Federal Court found both companies misled consumers through a national advertising campaign promoting "interest-free" and "no deposit" payment options that concealed hundreds of dollars in fees.

Justice O'Bryan imposed a $35 million penalty on Harvey Norman and a $20 million penalty on Latitude, representing the highest combined penalty the Australian Securities and Investments Commission (ASIC) has secured for misleading conduct and false or misleading representations relating to financial products and services.

The Harvey Norman penalty is more than twice the $16.2 million that the company previously made provisions for in its financial accounts.

The case centred on a campaign run between January 2020 and August 2021 promoting a 60-month interest-free, no deposit payment method across Harvey Norman's retail network.

The advertising failed to disclose that consumers were required to obtain a Latitude GO Mastercard, which carried establishment fees and monthly account service fees totalling at least $537 over the full term.

Justice O'Bryan found both companies "put sales and their commercial interests above the interests of consumers".

The Federal Court Justice said the companies "also distorted the markets in which competing goods and finance are offered".

"The compliance processes of both defendants were wholly inadequate to prevent the contravening conduct," said Justice O'Bryan.

"Given the scale and sophistication of both defendants, that is an extraordinary state of affairs," he said, adding that it "is particularly striking in the case of Harvey Norman".

Harvey Norman received the larger penalty due to what the court described as lower contrition, with the judge referencing public statements by the company's chairman that showed "a disregard for the potential harm suffered by consumers".

Both companies have been ordered to publish corrective advertising on their website home pages for 90 days.

ASIC chair Sarah Court said the penalties reinforced the importance of integrity in consumer finance marketing.

"The substantial penalties and the corrective advertising orders imposed on Harvey Norman and Latitude is a significant outcome for consumers and sends a strong warning to the market about the importance of truthful and transparent advertising," said Court.

"This case is about integrity in consumer finance marketing. Consumers were entitled to know that this offer involved more than simply paying for their purchase in 60 instalments.

"The advertising encouraged consumers into an ongoing credit arrangement that carried additional costs and obligations.

"Today's outcome sends a strong message that businesses must give consumers a clear and accurate picture of the products they are promoting and the costs that come with them."

In a statement to the ASX today, Harvey Norman acknowledged the penalty imposed by the Federal Court and apologised for its actions.

"While the company did not intend to engage in false, misleading or deceptive conduct, the company apologises unreservedly to the court and customers," said the company.

"The company is committed to promoting a culture of compliance with all its legal obligations and will continue to work hard to comply with those obligations."

Harvey Norman also said following the penalty decision it will recognise in its financial accounts for the year ending 30 June 2026 a higher expense than the $16.2 million previously recorded.

Latitude Group Holdings (ASX: LFS), which owns Latitude Finance Australia, said it had largely made provisions for its $20 million civil penalty.

"As this is a one -off cost, there is no impact on continuing operations," said the company.

ASIC first filed proceedings against the two companies in September 2022, alleging the campaign's prominent "interest free" and "no deposit" representations were misleading because they did not adequately disclose the fees consumers would incur.

In October 2024, the Federal Court ruled in ASIC's favour, finding the advertising had misled consumers. While Harvey Norman and Latitude appealed the decision, the Full Federal Court dismissed their appeals in August last year.

The regulatory action has also triggered private litigation with Carter Capner Law filing a class action in Queensland's Supreme Court in December last year.

The claim estimates Latitude recovered $19 million in monthly account service fees and $739,900 in establishment fees from affected consumers, with average fees exceeding 15 per cent of the purchase price per consumer.