Harvey Norman, Latitude Ordered to Pay $35.9 Million Over Misleading Interest-Free Finance Campaign

Key Takeaways

• Record Penalties: Australia's Federal Court ordered Harvey Norman and Latitude Finance Australia to pay a combined $35.9 million (AUD $55 million) for misleading consumers through a nationwide interest-free finance advertising campaign.
• Hidden Credit Obligations: The Court found the advertisements failed to make clear that customers were required to take out a credit card and pay ongoing account service fees, with establishment fees also applying until March 15, 2021.
• Compliance Breakdown: Justice O'Bryan concluded both companies had "wholly inadequate" compliance processes, despite their size and sophistication, allowing the misleading advertising to reach millions of Australians.
• Harvey Norman Receives Larger Fine: Although the companies were found equally responsible for the misleading conduct, Harvey Norman was ordered to pay the larger penalty after the Court found stronger deterrence was warranted based on its level of contrition and public response.
• Corrective Advertising Ordered: Both companies must prominently display corrective advertising on their website homepages for 90 days, reinforcing the Court's expectation that misleading financial promotions be publicly corrected.

Deep Dive

On Tuesday, the Australian Federal Court ordered Harvey Norman Holdings and Latitude Finance Australia to pay a combined $35.9 million (AUD $55 million) after finding they engaged in misleading conduct and made false or misleading representations in a nationwide advertising campaign that ran between January 2020 and August 2021. Harvey Norman was ordered to pay $22.8 million (AUD $35 million), while Latitude was ordered to pay $13.1 million (AUD $20 million). According to the Australian Securities and Investments Commission (ASIC), the combined penalty is among the largest it has secured in a case involving misleading conduct related to financial products and services.

The campaign invited consumers to believe they were simply spreading the cost of a purchase across five years. That impression, the regulator argued successfully, concealed something more consequential. Customers could not access the offer without taking out a credit card, including products such as the Latitude GO Mastercard, and once they did, they became responsible for monthly account service fees and, until March 15, 2021, establishment fees as well.

Justice O'Bryan concluded that Harvey Norman and Latitude bore equal responsibility for the misleading advertisements. His criticism reached beyond the campaign itself and into the systems that allowed it to happen. The compliance processes at both companies, he wrote, were "wholly inadequate" to prevent the conduct, an assessment he described as extraordinary given the size and sophistication of the businesses involved. The shortcomings were "particularly striking" in Harvey Norman's case.

The judgment also rejected the notion that the advertisements were harmless marketing shorthand. Instead, the Court found the companies placed their commercial interests ahead of consumers while distorting competition in both the retail and consumer finance markets. What appeared to be an offer about paying over time was, in reality, an invitation into an ongoing credit arrangement carrying costs and obligations that the advertising failed to communicate with sufficient clarity.

Although the Court found the companies equally responsible for the contraventions, it imposed the larger penalty on Harvey Norman after determining that the two businesses had demonstrated different levels of contrition. The judgment also found that Harvey Norman's public response reflected a disregard for the potential harm consumers may have suffered, making a stronger financial penalty necessary to deter similar conduct and encourage more robust compliance practices.

The consequences extend beyond the fines themselves. Both Harvey Norman and Latitude have been ordered to publish immediately visible corrective advertising on the homepages of their websites for 90 days, an acknowledgment that when misleading claims are broadcast to millions, the correction should be just as difficult to miss.

For ASIC, the case reaches beyond a single advertising campaign. Consumer finance depends on informed consent, and informed consent begins with telling people what they are actually signing up for. The Court's ruling makes plain that attractive marketing language cannot be allowed to obscure the existence of a credit product, its fees or its obligations. When the promise is simple but the reality is not, the law expects the advertising to reflect the difference.

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