ASIC has taken American Express to court over alleged breaches of its design and distribution obligations, in what will be the first court case to consider the DDO and the regulator’s approach to enforcing it. Amex issued two cards that were co-branded with retailer David Jones. Under the DDO, Amex was required to make target market determinations for the products and review them if it became aware of circumstances indicating the TMDs were no longer appropriate. ASIC alleges that by early 2022 Amex was aware that the cancellation rates for consumers who applied for the cards in David Jones stores were high, and significantly higher than cancellation rates for credit cards applied for online. It also alleges that Amex knew some consumers were confused about whether they had applied for a loyalty card or a credit card and that this indicated the TMDs were not appropriate. It claims Amex should have stopped issuing the cards and reviewed their TMDs but it continued to issue the cards until July.  Under the DDO rules, which were implemented in October last year, financial services companies are required to identify the target market for any product that requires a disclosure document and must design the product for that market. They have to select appropriate distribution channels and periodically review those arrangements to ensure they continue to be appropriate. The scheme is aimed at reducing the harm of mis-selling by requiring issuers to design products for which an appropriate target market can be identified. ASIC deputy chair Sarah Court said in a statement yesterday: “It is critical that providers respond to poor outcomes.” The regulator put credit card issuers on notice in October. Speaking at the Australian Credit Law Conference, ASIC Commissioner Sean Hughes said: “We will be reaching out to credit card providers to let them know that we will collect data from them around problematic debt, including any proactive steps providers are taking to prevent consumers getting into these situations “We expect them to be able to identify any poor product design leading to poor outcomes. We expect credit card providers to use this material to better inform their design and distribution of credit cards, and improve the quality of outcomes for consumers.”