‘Interest free’ purchases cost a lot more than you think
A little while ago, we looked at extended warranties offered by some retailers for white goods and consumer electronics. During that examination, we noted that even though customers pay good money for these warranties, a lot of them are of little or no value because they simply duplicate protections consumers already enjoy under the law.
As a follow-up, this week’s legal update explores another retail legal issue.
ASIC is extremely interested in ‘interest free’ loans
The Federal Court recently ruled in a matter concerning ‘interest free’ loans for household goods offered by Harvey Norman and Latitude Financial Services.
The court found that Harvey Norman and Latitude engaged in misleading and deceptive conduct during a prolonged sales promotion. Advertising for the sales campaign heavily emphasized and promoted the sale of household goods on credit with no deposit and 60 months interest free.
In fact, the offer was much more onerous than that.
ASIC brought proceedings against Harvey Norman and Latitude on the basis that the advertising did not disclose that, before they could access the 60 month interest free offer, customers were first required to sign up for and use a Latitude-branded credit card. These credit cards came with both application fees and monthly account fees.
These hidden fees could be substantial. Monthly account fees alone would exceed $500 over 60 months. This means that if a customer made a $1000 purchase, the true cost of that purchase would ultimately increase by more than 50% over the original purchase price.
Advertising was misleading and deceptive
ASIC’s concern was that Harvey Norman’s advertising was presented as a complete statement of the key payment terms (i.e. an interest free period and no deposit) and by omitting reference to the requirement to apply for a credit card, the advertising was inherently misleading and deceptive.
Indeed, there was evidence that consumers were misled in practice, with some attesting that they believed they were merely signing on for a loan and being surprised when instead a credit card arrived in the mail.
Key Takeaway
There are two lessons that customers should learn here.
Firstly, promotions offering highly attractive payment terms should always be closely scrutinised.
From a consumer’s perspective, the likelihood is that the conditions attached will negate the entire benefit of the whole promotion.
Secondly, even if the promotion seems valid, few retailers can afford to offer finance to customers without factoring this into their pricing. In other words, there may be a discount to be negotiated if you’re willing to pay the full amount up front.
Aintree Group Legal will be happy to discuss your commercial law needs. Contact us today.
This is general advice only and has not been prepared with your situation and needs in mind. For individual and personalised advice, we highly recommend that you seek out proper professional advice from your lawyer.
