International credit card giant American Express (Amex) has been ordered to pay $8 million in fines by the Australian Federal Court for breaching its obligations towards consumers with regards to responsible lending.
It’s a little complex, but Amex has been penalised for two credit cards it offered through retailer David Jones. The Federal Court has determined Amex failed to recognise the target market determination (TMD) for the cards had changed, and the cards were being marketed to inappropriate customers as result.
A TMD is a legal document a lender must produce for each credit product it offers. It outlines the financial profile of the intended customer – who should be someone in a financial position to service the credit.
The Court is saying that due to changing economic circumstances, the customer modelled in Amex’s original TMD could no longer comfortably service the credit card, and as such it should no longer be offered until a new TMD can be drawn up.
Federal Court Justice Darren Jackson said Amex were being fined not just for the inappropriate TMD, but also for not having systems in place to ensure TMDs were current.
“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.”
Do you think this ruling is fair? Do lenders have a responsibility to consumers or should customers be more financially savvy?
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