Credit provider GE Money has been slapped with a $1.5 million fine by the Federal Court for forcing customers to consent to receiving invitations to increase their credit card limits.
The court found GE Capital Finance Australia, which trades as GE Money, was in breach of laws that ban credit providers from making unsolicited credit limit increase offers to customers.
The credit company told more than 700,000 of its credit card customers they had to consent to receiving such invitations in order to activate their credit card or apply for or obtain an increased credit limit, when it did not require such consent.
The conduct took place between January 5 and May 27, 2012, shortly before the government’s prohibition on unsolicited invitations.
Justice Peter Jacobson slammed the creditor’s conduct as “a systematic and deliberate attempt to mislead cardholders” and said GE Money’s motivation was to avoid projected losses of up to $6 million as a result of the tightening regulations.
In imposing a penalty of $1.5 million, the court said: “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.”
GE Capital was ordered to pay the Australian Securities and Investment Commission another $50,000 for costs and to advise 210,000 affected cardholders what the decision meant via email or letter and by publishing a notice on its website.
GE Capital admitted it had broken the law during proceedings.
A spokesperson for the company told SmartCompany GE Capital had been working with ASIC for some time on the matter and had already sent the note to customers.
“We have also been working with the regulator and government and will continue to do so,” said the spokesperson.
Sally Scott, partner at Hall & Wilcox, told SmartCompany it was common for credit card holders to receive regular invitations to increase their credit limits prior to the new laws, which commenced on July 1, 2012.
Since that time, Scott says before sending out invitations for credit limit increases, credit card companies have been required to obtain consent from card holders to send out invitations.
“It appears that GE Capital sought to short cut this requirement by telling consumers that they needed to consent in order to activate their card,” says Scott.
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“In fact, GE Capital did not require such consent for cards to be activated. For this reason, the court determined that the statement was misleading.”
Scott says for businesses it’s not just a matter of checking that their advertising is not misleading, they need to consider every aspect of their business and what representations they make, whether to consumers or other businesses.
“In a week where we have seen misleading conduct cases in relation to an online buying site and online testimonials/reviews, this case provides yet another example of the far reach of misleading conduct law,” says Scott.
“The golden rule is that you can’t mislead in business.”