ASIC Takes Amex To Court Over David Jones Credit Cards

ASIC has launched Federal Court proceedings against American Express Australia over two Amex credit cards co-branded with David Jones.

This marks the national corporate regulator’s first civil penalty case alleging breaches of ‘design and distribution obligations’.

Under these obligations, Amex was required to make a “target market determination” which pinpoints who the credit cards would be appropriate for, and how the cards should be distributed.

They are also required to review these determinations if a situation arises that suggests the TMD is no longer appropriate.

ASIC alleges that the TMDs issued by Amex “did not limit distribution to people looking to make purchases on credit with a card that earned points or other benefits.”

ASIC also alleges that by February this year, Amex was aware that cancellation rates for the David Jones credit cards were significantly higher than similar cards, and that some consumers were confused about whether they had applied for a loyalty card or a credit card.

Despite these cancellations and confusion clearly suggesting the initial TMD needed a revision, Amex continued to issue the credit cards until July 5.

“The design and distribution obligations embed a consumer-centric approach for the issuers and distributors of financial products,” Deputy Chair Sarah Court said.

“Product providers must monitor and review whether consumers are receiving products consistent with their needs and cannot bring a ‘set-and-forget mindset’ to product governance. It is critical that providers respond to poor outcomes they identify by making changes.

“ASIC has now taken multiple actions under the design and distribution regime, including issuing over 20 interim stop orders.

“This regime turned a new page in the regulation of financial products in Australia and is intended to deliver better outcomes for consumers.

“It is a priority for ASIC to maximise these increased protections and see the long-term benefits of the DDO regime realised.”

ASIC is seeking declarations and pecuniary penalties from the Court.