Australia Sues Amex for Violating Credit Card Distribution Rules

Australia’s securities regulator says American Express issued customers cards without ensuring they understood them.

In a lawsuit filed Monday (Dec. 6), the Australian Securities & Investments Commission (ASIC) alleges that the credit card company was aware that customers might have some confusion about whether they were applying for a credit card or loyalty card when they signed up for the offering through the department store David Jones.

“Product providers must monitor and review whether consumers are receiving products consistent with their needs and cannot bring a ‘set-and-forget mindset’ to product governance,” ASIC Deputy Chair Sarah Court said in a news release. “It is critical that providers respond to poor outcomes they identify by making changes.”

ASIC calls the suit, which seeks “declarations and pecuniary penalties,” the first of its kind. 

In an emailed statement to PYMNTS, an Amex spokesperson said: “American Express takes any allegations made by ASIC seriously and will continue to cooperate with ASIC in relation to this matter.”

According to ASIC, Australia’s “design and distribution obligations” require companies like American Express to make a target market determination (TMD) that describes who the credit cards would be appropriate for and how they should be distributed.  

The agency says American Express knew some consumers were confused about its cards and that, in that situation, the company was required to stop issuing them. ASIC says that American Express nonetheless kept issuing the cards until July 5 of this year.

The suit comes weeks after Australia’s government said it was considering rules that would treat the country’s buy now, pay later (BNPL) sector the same way it does credit cards.

The country’s government is looking for input into three options that would place stricter guidelines on BNPL companies, with Assistant Treasurer Stephen Jones saying the industry requires more oversight as the sector grows.

“Australians are some of the most enthusiastic adopters of new technology on the planet,” he said. “They love the convenience of buy now pay later, but they want to know it’s safe. We need to find that happy medium, balancing consumer protection with innovative new products.”