American Express Breaks Australian Credit Card Rules
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American Express is now being targeted by the Australian Securities and Investment Commission (ASIC) for breaking the rules about how financial products should be designed and distributed. The Australian court has also told the credit card company to pay AU$8 million because of these rule violations.
ASIC revealed that the breaches of the DDO rules were linked to two co-branded credit cards that were mostly handed out to customers at David Jones stores. The regulator started legal action against the credit card issuer in December 2022 with civil penalty proceedings.
The Company Continued Issuing The Credit Cards Without Reviewing The TMDs
The court said the credit card issuer broke the DDO rules from 25 May 2022 to 5 July 2022. The company should have known that the target market decisions (TMDs) were unsuitable because many applications were cancelled. Also, the company kept issuing the credit cards even though it hadn’t checked the TMDs.
The Australian judge explained that, besides having to find the right target market in a TMD, financial product issuers and distributors must also regularly check if there are any signs that an existing TMD might no longer be suitable. This was part of the reason for the penalty.
A fine like this is set high enough to make sure American Express does not repeat their actions and to discourage other financial product companies from breaking the rules. It’s meant to be more than just a small price of doing business and should really make a difference.
In line with many other markets, MasterCard and Visa were the top credit card brands in Australia from 2016 to 2022, based on Statista’s data. Nevertheless, by the end of 2022, American Express had secured 7 percent of the market.
The Court Highlighted The Need To Review And Adjust Systems
While the court did impose the fine, it disagreed with the regulator’s argument that American Express had failed to take all reasonable steps to make sure David Jones knew what was going on and that they should not continue distributing the credit cards in their stores.
Sarah Court, ASIC’s Deputy Chair, explained that this decision is important because it shows that companies issuing and distributing financial products must have proper systems to keep an eye on events and situations that might indicate a target market decision is no longer right.
American Express is a major American bank and financial services firm that deals mainly with payment cards. The company’s headquarters are at 200 Vesey Street, known as the American Express Tower, in the Battery Park City section of Lower Manhattan.
