Harvey Norman and Latitude Finance’s misleading advertising appeal shut down in court

An offer of 60 months of interest-free credit can be especially compelling to people who don’t have the cash on hand to buy something they need. It has the whiff of free money. But in the case of the Latitude Finance and Harvey Norman partnership, important details were left out of the advertising campaign.

It turned out that the interest-free offer involved signing up for a Latitude credit card – one that came with an initial cost as well as ongoing monthly fees. The advertisements neglected to mention this. They also didn’t explain that a single late payment would result in the loan going from interest-free to some of the highest interest rates on the market.

The advertisements also didn’t explain that a single late payment would result in the loan going from interest-free to some of the highest interest rates on the market

Handing out credit cards at point of sale without robust responsible lending checks is a practice that earned the lender and retailer a 2020 CHOICE Shonky. As part of that investigation, we profiled cases of Harvey Norman flogging Latitude credit cards at the checkout counter and encouraging customers to buy items on finance they didn’t need or ask for – we even found cases where salespeople suggested a $12,000 limit when the product being sold cost a fraction of that sum.

By way of example, we also pointed out that making only the minimum repayments on a $5000 Harvey Norman Latitude Mastercard Go at 22.74% would mean paying $17,909 over the 29 years and eight months it would take to pay off the loan ($12,909 in interest).

Grounds for appeal ‘barely arguable’

In 2022, the Australian Securities and Investments Commission (ASIC) launched a court case against Latitude Finance and Harvey Norman for “pursuing a national advertising campaign which failed to adequately disclose the true scope and cost of the promoted payment method”.

In October last year, the court ruled that the lender and retailer had broken the law, but Latitude Finance and Harvey Norman appealed the decision. In August this year the Full Federal Court knocked back the appeal and suggested it should have never been mounted.

The court ruled that the grounds of appeal “lack merit and are barely arguable” and that it was “regrettable that the final determination of remedies in this proceeding has been delayed by the unmeritorious applications for leave to appeal”.

ASIC took this case because we believed many consumers were unaware of the financial arrangements they were entering into, and they deserved to be fully informed

ASIC deputy chair Sarah Court

The legal team for Latitude Finance and Harvey Norman tried to convince the court that people seeing the advertisements would know there must be a catch and therefore they weren’t misleading. This didn’t fly with the court.

“Ordinary and reasonable consumers would have assumed that the offer made in the advertisements was stated accurately, particularly in light of Australia’s strong consumer protection laws,” the court stated.

“This is an important win for consumers. ASIC took this case because we believed many consumers were unaware of the financial arrangements they were entering into, and they deserved to be fully informed,” says ASIC deputy chair Sarah Court, adding that the decision “reinforces the importance of truthful advertising”.

ASIC will be seeking court costs and financial penalties for Latitude Finance and Harvey Norman as well as an injunction against further misleading ads.

Stock images: Getty, unless otherwise stated.