Top-tier banks and financial services companies have been spared ignominy in CHOICE’s annual Shonky awards, with retailer Harvey Norman claiming the 2020 prize for selling over-priced credit cards.
While all financial services companies require licensing to market credit cards, a loophole in Australian laws means that retailers are free to flog credit products without having to account for any responsible lending obligations.
Harvey Norman sells a house-branded credit card that carries a punitive rate of 22.74 per cent.
The issuer of the card is Melbourne-based personal finance provider, Latitude Financial Services.
CHOICE described Harvey Norman’s partnership with Latitude as “toxic.”
“Financial counsellors and community legal centres all across Australia have seen the impact of Harvey Norman’s toxic alliance with Latitude Finance,” said CHOICE financial services campaigner, Patrick Veyret.
“Harvey Norman, with Latitude Finance, sells one of the highest interest rate credit cards on the market at 22.74 per cent through its stores.
The cash rate is at a record low so there’s no justification for cards this expensive - customers walk in for a television or toaster and walk out with crippling debt.”
Veyret warned that the federal government’s decision to suspend responsible lending laws during the economic crisis induced by the pandemic had opened the door to consumer exploitation.
“Normally the law requires finance companies to do basic checks to ensure Australians won’t be harmed by, tricked or pressured into inappropriate or exploitative credit products,” he said.
“Retailers like Harvey Norman have long enjoyed an exemption from these laws and now the federal government plans to remove these responsible lending protections.”
Veyret said Harvey Norman had turned its retail stores into the finance industry’s “dirty secret”.
“Financial counsellors report seeing Harvey Norman and Latitude Finance debt appear far too often when assisting people in financial hardship,” he said.
“If the government scraps responsible lending laws, these kinds of toxic partnerships will become the norm and Australia’s already record levels of personal debt will send our country into a debt disaster.”
In becoming the first retailer to claim a shonky in the financial services category, Harvey Norman breaks a five-year stranglehold of the major banks and big financial services brands on the title.
AMP won a shonky last year for charging clients for advice that it never provided.
In 2018, Commonwealth Bank was called out for its suspect marketing of products to school children through the Dollarmites program. The program has since been overhauled.
Westpac and National Australia Bank are also past winners of the Shonky award.