Asic sues Harvey Norman over ads for ‘interest-free’ purchases
The corporate regulator has launched legal action against Harvey Norman and the credit provider Latitude, accusing the retailer and the finance company of misleading and deceptive conduct over an advertising campaign offering “60 months interest-free” purchase terms for household goods.
In documents filed with the federal court on Tuesday afternoon, the Australian Securities and Investments Commission said the ads, which appeared in newspapers, on radio and on TV between 1 January 2020 and 11 August 2021, misled consumers into thinking they could buy goods from Harvey Norman by making 60 equal monthly payments.
In fact, the offer required buyers to sign up for and use a credit card offered by Latitude, which carried fees and charges that could result in them paying hundreds of dollars more than the sticker price of the goods they bought.
“Asic is concerned the advertising did not provide consumers with the full picture, that they could only use the interest-free payment method by applying for and using certain Latitude credit cards,” the deputy chair of Asic, Sarah Court, said.
“These credit cards, Asic alleges, attracted substantial fees over the course of the 60-month payment term, and exposed consumers to the risks of incurring further debts and charges, as well as potentially affecting their credit rating.”
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In court documents, Asic alleges that although disclaimers that terms, conditions and fees applied were delivered in small print in the newspaper, “tiny text” in the TV ads and “read at a greater speed and in a more subdued tone” in the radio ads, the allegedly misleading effect was not “clearly and prominently corrected by any qualifying statements elsewhere in the advertisements”.
Fees charged on the card required to take advantage of the offer, the GO Mastercard, varied over time. Some users were charged an establishment fee of $25 and a monthly fee of $5.95 while others were charged a monthly fee of $8.95. Additional monthly fees applied when the balance on the card was more than $10.
“These fees were substantial, and could comprise a substantial proportion of the overall repayments,” Asic said in court documents.
“For example, a consumer who, during the relevant period after 16 March 2021, purchased a refrigerator with a retail price of $1,000 using the payment method … and paid the 60 monthly instalments on time, would have to pay a minimum total of $1,537 (which would include $537 of monthly account service fees over the course of the 60 month payment term).”
Asic has asked the court to order Harvey Norman and Latitude to pay a fine and take out corrective advertising, three times a week for two weeks, admitting to misleading and deceptive conduct.
The regulator has also asked the court for an order forcing the companies to prominently disclose terms, conditions and fees in any future ads.
Harvey Norman is one of Australia’s biggest advertisers across print newspapers, radio and TV.
The marketing material attacked by Asic included front page ads, wraps and other display ads that appeared in News Corp, Seven West and Nine Entertainment papers, as well as TV ads that appeared on Seven and radio ads that were played on stations owned by Southern Cross Austereo stations.
In a statement, Latitude said it “takes these allegations very seriously and has worked cooperatively with Asic during its investigation”.
“Latitude is now reviewing Asic’s
claim and will not be commenting further at this stage given the matter is before the courts.”
Harvey Norman’s executive chairman, Gerry Harvey, has been contacted for comment.