Source : financemagnates, Friday, 2024/7/19
American Express has become the latest target of the Australian Securities and Investment Commission (ASIC) for breaching its Design and Distribution (DDO) obligations. An Australian court also ordered the credit card giant to pay A$8 million for breaches..
Violations of DDO obligations
ASIC announced today (Friday) that the DDO breaches were linked to two co-branded credit cards, which were primarily distributed to customers at David Jones stores.The regulator moved against the credit card issuer in December 2022 with civil penalty proceedings.
According to the court, the credit card issuer violated DDO rules between May 25, 2022 and July 5, 2022, as they had to be aware of of target market selections (TMDs) due to high rates of cancelled orders. Moreover, the company did not stop issuing credit cards when it did not review the TMD devices.
“In addition to the obligation to identify the appropriate target market within the TMD system, this consumer-centered approach is a requirement for issuers and distributors of financial products to review events and circumstances that may indicate that the current TMD system is no longer appropriate,” the Australian judge said when ordering the punishment..
The sanction of this order ensures that it has sufficient effect to deter the duplication of American Express and the violation by other financial product providers, which goes beyond being just “the cost of doing business.””.
Like most markets, Visa andMasterCard dominated the Australian credit card market between 2016 and 2022, according to Statista. However, at the end of 2022, American Express had a market share of 7 percent..
Partial victory
Although the court imposed the sanction, it dropped the regulator’s claims that American Express failed to take all reasonable steps to ensure David Jones was informed and should not continue to distribute credit cards in the store..
Sarah Court, Vice President of ASIC, said: “This is an important decision as it highlights the requirements of issuers and distributors of financial products to clients to have appropriate systems to monitor events and conditions that indicate that identifying the target market is no longer appropriate.”. .
