American Express Australia Fined AU$8 Million For Breach Of Credit Card Rules

The federal court in Australia has ordered American Express Australia Limited (Amex) to pay AU$8 million in fines for failing to meet its design and distribution obligations (DDO) for two of its co-branded credit cards that were distributed at the David Jones stores.

The court found that Amex breached the DDO as a credit card issuer as it distributed two of its credit cards at the stores of the luxury brand between May 25 and July 5, 2022, without determining the target market, corporate regulator Australian Securities & Investments Commission (ASIC) stated.

The ASIC had initiated civil penalty proceedings against Amex for breaching the DDO while distributing two co-branded credit cards -- the David Jones American Express Card and the David Jones American Express Platinum Card -- at the David Jones department stores.

Amex will have to pay AU$8 million in penalties because it did not realize that the high rate of cancelled applications meant that target market determinations (TMDs) for the cards were inappropriate; second, the company failed to issue credit cards without first reviewing the TMDs.

A TMD is a document that defines the target market for a product and the conditions regarding its distribution to customers, reported Reuters.

"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'," Federal Court Justice Ian McNeil Jackman said.

The court also noted that those at Amex tasked with the monitoring of TMD were unaware of their responsibility, and those who were aware of the circumstances failed to take action in resolving the issue.

ASIC's Deputy Chair Sarah Court said, "This is an important decision, because it highlights the requirement for issuers and distributors of financial products to customers to have in place adequate systems to monitor events and circumstances that suggest a target market determination is no longer appropriate."