ASIC has announced it has commenced proceedings in the Federal Court in its first civil penalty case alleging breaches of design and distribution obligations (DDO) against American Express Australia Limited (Amex), principally that Amex did not consider whether the cancellation rates for its David Jones co-branded cards were a Review Trigger, or an event or circumstance that would reasonably suggest that the target market determinations (TMD) were no longer appropriate.

ASIC alleges in its action that the David Jones Amex Card and David Jones Amex Platinum Card were co-branded credit cards distributed through David Jones department stores as well as online from August 2008 until July 2022 and September 2012 until July 2022, respectively.

Under the design and distribution obligations, Amex was required to make a TMD describing who the credit cards would be appropriate for and how the cards should be distributed.

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 says David Jones’ staff encouraged consumers to apply for the Cards at the point of sale of a product in the store. On occasion, David Jones promoted the Cards by offering consumers a discount on their purchases if they applied for a Card at the point of sale. American Express was aware of the promotions run by David Jones that related to the Cards. The application was made on an iPad provided by David Jones staff.

ASIC also alleges that by February 2022:

• Amex was aware that the cancellation rates for consumers who applied for the credit cards in David Jones stores were high, and significantly higher than cancellation rates for credit cards applied for online; and
• Amex knew some consumers were confused about whether they had applied for a loyalty card or a credit card and that this was a circumstance that indicated the TMDs were not appropriate and required Amex to review the TMD and stop issuing the credit cards. ASIC claims that despite this, Amex continued to issue the credit cards until 5 July 2022.

ASIC claims that in the period from January 2022 to 1 June 2022, Amex did not consider whether the cancellation rates for the Cards were a Review Trigger, or an event or circumstance that would reasonably suggest that the Determinations were no longer appropriate.

ASIC is seeking declarations and pecuniary penalties from the Court.

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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.