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The nation’s corporate watchdog has delivered a blow to electrical products giant Harvey Norman (ASX: HVN) and personal finance group Latitude (ASX: LFS) today after the Federal Court found both companies misled consumers in an advertising campaign for an interest-free payment method.
The Australian Securities and Investments Commission (ASIC) was concerned advertisements published between January 2020 and August 2021 masked the fact that consumers were required to take out a credit card, such as the Latitude GO Mastercard, to purchase goods.
The widespread campaign advertised a 60-month interest-free and no-deposit payment method and was promoted in newspapers, on radio and on television stations across Australia. ASIC alleged in the trial that both companies failed to comply with the ASIC Act by failing to adequately disclose the true scope and cost of the promoted payment method.
“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,” ASIC deputy chair Sarah Court said.
“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.”
The news comes one month after Harvey Norman also found itself hit with a class action over claims that customers were sold extended warranties on electrical goods that were of “little to no value” and already covered by consumer law.
The class action is being led by Melbourne-based firm Echo Law, which has lodged the claim on behalf of consumers who were sold an extended warrant at the time they purchased goods from Harvey Norman, Domayne and Joyce Mayne stores, either in-store or online, between 17 September 2018 and 17 September 2024.
In the most recent ruling against Harvey Norman, the Federal Court found that while the advertisements claimed to fully explain the payment method, it had failed to do so.
Justice Yates noted that consumers looking to make purchases were actually entering into a significantly different financial agreement than what was advertised - specifically, a continuing credit contract with Latitude tied to the GO Mastercard, which required them to pay both an establishment fee and ongoing monthly service fees, regardless of whether they desired the credit card.
A hearing to determine the penalties is likely to be scheduled for next year. ASIC will seek relief, including financial petalites against Latitude and Harvey Norman.
Both companies have acknowledged the ruling in announcements to the ASX.
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