In a recent Federal Court case brought by ASIC against Latitude Finance Australia (Latitude) and Harvey Norman Holdings Ltd (Harvey Norman), ASIC took issue with Harvey Norman’s advertising practices, alleging that its "no deposit, no interest" advertising campaigns misled consumers by obscuring the costs associated with, and practical requirements of, the advertised financing options. The case is a stark reminder to businesses in the retail and finance sectors of the importance of transparent and accurate advertising, particularly where consumer credit is concerned. As always, the key with big, bold marketing campaigns is to ensure that any ‘fine print’ qualifications are prominent and in close proximity to the headline claim.

Background

Between January 2021 and August 2021, Latitude Finance and Harvey Norman promoted "no deposit, no interest" payment plans through advertisements across major media channels, including print, radio, and television. The campaigns highlighted enticing messages of "no deposit, no interest" with simple payment options. However, a crucial caveat was omitted from the primary claims of these advertisements: the financing required consumers to sign up for a Latitude GO Mastercard, which came with substantial fees.

The omitted details of the Latitude GO Mastercard included a one-off establishment fee, ongoing monthly account service fees, and other associated costs – all necessary for the financing but downplayed in the advertising materials. Consumers were, therefore, led to believe they were entering into a straightforward, cost-free finance arrangement, which created confusion and concern when Latitude began charging them fees.

Key Legal Issues

Misleading or deceptive conduct under Australian consumer protection laws

Central to the case was whether the advertisements were misleading or deceptive. Similar to the Australian Consumer Law, the Australian Securities and Investments Commission Act 2001, prohibits corporations from engaging in misleading or deceptive conduct focussing on financial services. The issue for Court revolved around the fact that critical details about the Latitude GO Mastercard fees were not disclosed prominently, leading to the question of whether this omission was likely to mislead or deceive an ordinary consumer.

Dominant message of the advertising campaign

The Court examined the overall impression created by the "no deposit, no interest" advertisements, which emphasised cost-free financing without prominent mention of the necessary Mastercard fees. A significant question for the Court was whether consumers would reasonably interpret the "no deposit, no interest" claims as covering all financing aspects, or if the disclaimers used in the advertisements effectively cured this false impression.

The ordinary consumer’s understanding

The Court’s assessment of the advertisements relied on the ‘ordinary and reasonable consumer’ perspective – that is, how an average consumer, without specialised financial knowledge but reasonable attentiveness, would interpret the advertising message. Recognising that consumer attention spans vary and that not all consumers are well-versed in reading fine print, the Court analysed the layout, font size, and placement of disclosures in the advertisements.

The Court’s Findings

Justice Yates ruled in favour of ASIC, concluding that Latitude and Harvey Norman engaged in misleading conduct by failing to disclose the costs associated with the Mastercard clearly. The Court found that consumers were likely to interpret the advertisements as suggesting a truly interest-free, cost-free option for purchases, leading to the assumption that payment plans involved simple, equal instalments rather than additional fees.

Prominence of banner statements

Justice Yates pointed out that the prominent "no deposit, no interest" claims, displayed in large, bold fonts, dominated the advertisements and created an overwhelming impression of cost free purchases. The disclaimers, by contrast, were relegated to fine print that was less likely to capture consumers’ attention.

Impact of ‘fine print’ disclosures

The Judge emphasised that the layout and font size of the disclaimers - including details about required fees – rendered them ineffective in countering the primary message of cost-free financing.

Consumer expectations of clarity

The Court emphasised that consumers should not need to read through dense fine print to discover key terms that fundamentally alter the financial product being promoted. Justice Yates noted that consumers reasonably expect transparent, easily visible terms and conditions, especially in financial promotions involving recurring fees.

The court’s decision reflects a heightened expectation for financial transparency in consumer advertisements, especially for products involving credit or additional costs beyond the promoted price.

What does this mean for your businesses?

1.Transparency is key in financial marketing

All terms and conditions, including any fees or costs, must be disclosed clearly and prominently in advertising. Avoid using ambiguous or complex language, and do not rely on fine print to convey material information. Critical disclosures should be as prominent as the key promotional claims to ensure transparency. This is true for all marketing, but especially true in more complex contracts, such as finance or telecommunications.

2. Design advertisements for the ‘ordinary consumer’

When designing marketing materials, consider the perspective of an ordinary consumer who may have English as a second language, be low on time or have lower levels of education and literacy. Avoid assuming that viewers will carefully examine fine print or understand complex financial language. Information vital to understanding the cost of the product should be upfront and straightforward.

3. Understand the serious risks of misleading advertising

This case highlights the legal, financial, and reputational risks of misleading advertisements. Breaching consumer protection laws, particularly with financial products, can result in severe penalties, corrective advertising orders, and brand damage. Businesses should maintain robust compliance programs to minimise these risks and ensure their promotional strategies align with consumer law standards.

4. Broader implications for businesses

In its findings, the Federal Court set a benchmark for clarity in financial product advertising. Businesses should note that disclaimers and disclosures, even when legally compliant in fine print, may still fail to prevent an overall misleading impression. Following Justice Yates’ findings, companies can expect the standard for advertising financial products to require even more stringent transparency, especially where costs and commitments could influence consumer decision-making.