American Express ordered to pay $8 million penalty for failing to meet design and distribution obligations
19 July 2024
The Australian Securities and Investments Commission (ASIC) has announced that American Express Australia Limited (Amex) has been ordered to pay an $8 million penalty. This penalty arises from Amex’s failure to comply with its design and distribution obligations under the Corporations Act 2001 (Cth).
Background
ASIC’s investigation revealed that Amex did not adequately design and distribute its credit card products in a manner that would ensure they were appropriate for the target market. Specifically, Amex failed to take reasonable steps to ensure that its products were distributed in accordance with the target market determinations (TMDs). This failure led to the distribution of credit card products to consumers for whom they were not suitable, potentially causing financial harm.
Key findings
- Inadequate TMDs: Amex’s TMDs were found to be insufficiently detailed and did not adequately identify the class of consumers for whom the products were appropriate.
- Failure to Take Reasonable Steps: Amex did not take reasonable steps to ensure that its distribution conduct was consistent with the TMDs. This included failing to adequately monitor and review the distribution of its credit card products.
- Consumer Harm: The inadequate design and distribution processes led to the sale of credit card products to consumers who were not in the target market, potentially resulting in financial detriment.
ASIC’s response to the decision
ASIC Deputy Chair Sarah Court stated that the penalty serves as a reminder to all financial services firms of the importance of complying with design and distribution obligations. These obligations are crucial in ensuring that financial products are distributed to consumers in a manner that is fair and appropriate.
Why is this decision significant?
The $8 million penalty imposed on Amex underscores the significance of adhering to design and distribution obligations.
Financial services firms are urged to review their compliance frameworks to ensure they meet the required standards, thereby protecting consumers from unsuitable financial products.
Get in touch
If you would like to discuss the implications of the above decision on your business, feel free to get in touch with us.
News & Insights
Posted in Design and Distribution Obligations