The Federal Court has ordered American Express Australia (Amex) to pay $8 million in penalties for breaching the design and distribution obligations (DDO) regarding two co-branded credit cards distributed mainly through David Jones stores, ASIC reported.
The breach occurred between May 25, 2022, and July 5, 2022.
Amex failed to recognise high cancelled application rates that indicated the target market determinations (TMDs) were inappropriate and continued issuing the cards without reviewing the TMDs.
ASIC deputy chair Sarah Court (pictured above) highlighted the ruling’s significance.
“This is an important decision because it highlights the requirement for issuers and distributors of financial products to have adequate systems to monitor events and circumstances that suggest a target market determination is no longer appropriate,” Court said.
“In addition to an obligation to identify an appropriate target market within a TMD, inherent in this consumer-centric approach is a requirement for financial product issuers and distributors to actively review events and circumstances that may suggest that an existing TMD is no longer appropriate,” Federal Court Justice Ian Jackman said.
“A penalty of this order ensures it has a ‘sting’ sufficient to deter both repetition by American Express and contravention by other providers of financial products, and one that goes beyond being a mere ‘cost of doing business’.”
Amex admitted to the contraventions and agreed that the penalties sought by ASIC were appropriate.
The court also noted internal failures at Amex.
“Those at Amex responsible for monitoring the TMDs were not aware of their obligations, and those who were aware of the relevant facts and circumstances failed to take action in respect of those matters,” Jackman said.
Additionally, Amex was ordered to pay ASIC’s costs of the proceedings.
ASIC commenced civil penalty proceedings against Amex on Dec. 5, 2022, alleging breaches of the DDO related to the David Jones American Express Card and the David Jones American Express Platinum Card.
The DDO regime mandates financial product issuers and distributors to maintain effective product governance and review events that might render existing TMDs inappropriate.
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