American Express to Pay AU$8 Million for Breaking Australian Credit Card Laws
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American Express is now facing action from the Australian Securities and Investment Commission (ASIC) for not following the design and distribution rules. An Australian court has also told the credit card company to pay AU$ 8 million for these rule violations.
ASIC announced that the breaches of design and distribution rules were connected to two co-branded credit cards, primarily marketed to customers in David Jones stores. The regulator took steps against the credit card company in December 2022 by filing civil penalty proceedings.
Credit Card Company Breaches DDO Regulations
According to the court’s findings, the credit card company violated the DDO regulations from 25 May 2022 to 5 July 2022, as it should have realized that the target market determinations (TMDs) were inappropriate because of the large number of canceled applications. Moreover, the company continued issuing credit cards despite needing to reassess the TMDs.
When issuing the penalty, the Australian judge pointed out that beyond the duty to find a proper target market within a TMD, financial product issuers and distributors must actively review any events or circumstances suggesting that the current TMD may be unsuitable.
This kind of punishment is strong enough to make American Express think twice before repeating the mistake and to scare other financial providers from breaking the rules, showing that it’s more than just a business cost.
American Express Captured A 7% Market Share By 2022
Like in many other places, Visa and MasterCard were the leading players in the Australian credit card market from 2016 to 2022, according to Statista. However, by the end of 2022, American Express had a 7 percent market share.
While the court imposed the penalty, it turned down the regulator’s charges that American Express failed to take all proper steps to notify David Jones and should halt distributing credit cards in the store.
Sarah Court, the Deputy Chair of ASIC, stated that the decision is crucial because it emphasizes the need for financial product issuers and distributors to set up proper systems. This setup is to help track events and situations that indicate a target market determination might not be suitable anymore.
American Express is a global finance company that offers many financial products and services. It was started in 1850 by William G. Fargo, Henry Wells, and J.C. Fargo and is based in New York City. Known as Amex, it has a good reputation, provides new payment solutions, and gives excellent customer service and unique rewards.
