In Australian Securities and Investments Commission v GE Capital Finance Australia, in the matter of GE Capital Finance Australia [2014] FCA 701 the Federal Court of Australia made declarations and ordered consumer credit provider GE Capital Finance Australia, which trades as GE Money, to pay a penalty of $1.5 million for making false or misleading representations concerning the existence, exclusion or effect of a condition or right, in contravention of section 12DB(1)(i) of the Australian Securities and Investments Commission Act 2001 (Cth) to up to 800,000 of its credit card customers.
The court found that at various times between 5 January and 27 May 2012, GE Capital communicated with certain credit card customers through phone calls and letters implying they could not activate new credit cards, or apply for or obtain an increased credit limit, unless they agreed to receive future invitations to raise their credit limits.
In fact there was no such requirement but the communications were intended to capture consents from existing customers ahead of the introduction of the prohibition in the National Credit Act. The intention was to mitigate losses expected to be suffered by GE Capital as a result of not having express consents from customers after the new regulatory regime became effective on 1 July 2012.
GE Capital’s intention was that the cardholders would not be informed of the option to choose not to receive credit card limit increase (CCLI) invitations.
The telephone activation scripts and the CLI Letters were very successful in obtaining the consent of cardholders to receive CCLI Invitations.
From 1 July 2012 Section 133BE of the National Consumer Credit Protection Act prohibits a credit provider from making an unsolicited written offer to increase a customer’s credit card limit unless the credit provider obtains the customer’s consent before sending an offer under section 133BF.
The strategy, which was implemented and approved by a steering committee established by GE Capital, was intended to avoid between $5.27 million and $6 million of losses which would otherwise have been expected to be suffered by GE Capital in the period from 2012 to 2015 under the new regulatory regime.
GE Capital acknowledged the contraventions and consented to the making of the declarations sought by ASIC. The parties agreed upon a proposed pecuniary penalty of $1 million to be imposed upon GE Capital pursuant to s 12GBA of the ASIC Act.
In imposing a higher penalty of $1.5 million, Justice Jacobson said:
” The contraventions were serious and the reach of GE Capital’s conduct was extensive and substantial….
This is not a case of inadvertence but is part of a carefully developed and implemented strategy which was intended to have far reaching effect. The parties are agreed that the conduct was systematic and deliberate in a number of material respects…
This was a systematic and deliberate attempt to mislead cardholders into giving their consent to receive invitations for future credit increases so as to avoid losses of up to $6 million which were projected to be suffered by GE Capital as a result of the tightening regulatory environment….
And it was a strategy which was pursued notwithstanding the concerns expressed by responsible senior employees…
What was involved was an attempt to obtain consents in an unlawful manner, and the adoption of a cynical approach by seeking to make the cardholders’ choices less straightforward. This is an approach which should be marked with the Court’s disapproval of the conduct so as to deter the contravener from repeating it in any circumstances in which a cardholder is asked to consent to a course of conduct proposed by GE Capital. “
Amongst other factors, Judge Jacobson took into account the fact that cardholders did not suffer any loss because GE Capital agreed not to rely on any of the consents that were given.
He observed that “GE Capital did not profit, in the sense that it was unable to mitigate its losses of up to $6 million which was the fundamental objective of its strategy. Nevertheless, it is well established that a substantial penalty may be imposed even though the strategy did not ultimately cause loss to consumers”.
The court also made orders requiring GE Capital to pay ASIC $50,000 for its costs and to advise cardholders what the decision means for them by sending emails or letters to approximately 700,000 affected cardholders and by publishing a notice on its website.
More than 1.6 million credit cards under 14 different brands were affected including Myer and Coles branded credit cards and also cards such as 28 Degrees MasterCard, GE Creditline, AFS Creditline, Buyer’s Edge, GE Money Eco MasterCard, GE Money MasterCard, GE Money Low Rate MasterCard, GO MasterCard, and Gem Visa.
