In the dark on interest-free deals

A CHOICE shadow shop of major retailers reveals lack of disclosure of interest rates, fees and conditions.
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01.Spotty disclosure


Our hands-on investigation into flexible payment offers – particularly interest-free deals – provides further evidence that they're rarely as good as they sound.

Interest-free deals can amount to a shopping trap and can cost you hundreds of dollars in fees alone, even if you pay everything off within the interest-free period. 

CHOICE looked at flexible payment offers offered by six major retailers and sent a CHOICE shadow shopper to see how the offers were handled in store. 

This article looks at:

For more information about Shopping, see shopping-and-legal.

Point of purchase

We visited one Sydney store each of major retailers Bing Lee, Bridgestone Tyres, David Jones, Harvey Norman, JB HIFI and Myer, where sales staff mostly gave our shopper incomplete or wrong information about details such as interest rates, fees and conditions. All the stores offered flexible payment deals and five of the six promoted them on their websites. 

To obtain an interest-free deal, you generally have to apply for a credit or store card, which can come with hefty annual fees and high interest. Application and monthly fees can also be tacked on. 
  • Five of the six stores we visited offered to sign our shopper up on the spot.
  • Another five of the six did not tell the shopper the interest rate that would apply if the purchase was not paid off within the interest-free period. 
  • Only one salesperson gave an interest-rate, but it was not the same as the rate advertised on the store’s website. 
  • A single store – David Jones – gave correct information about all the fees that apply. 
  • The other stores either gave no information about most of the fees or gave information that didn’t match the website promotions. 
  • Two stores offered our shopper a shorter interest-free period than was advertised on their websites.

Lax oversight

CHOICE is concerned that oversight of financial products marketed directly to consumers is lax at point of sale due to a regulatory loophole. Under the current regime, retailers are exempt from some important licensing requirements imposed on the credit providers whose products they represent. The obligation for store staff to fully disclose financial details is spotty at best.

An Australian Securities and Investments Commission spokesperson told CHOICE: “The obligation to disclose certain information falls legally on the credit provider, not the point of sale representative working for a retailer. In a practical sense, however, the retailer may, and often does, gather information, distribute and generate documents and get the customer's signature, as the credit provider's representative, at the point of sale.” 

The spokesperson confirmed that the credit provider is allowed under current legislation to pass disclosure duties onto the retailer, adding that “disclosure of fees and charges is usually made by way of the financial table which is contained in a copy of the credit contract given to customers before entering the contract”. 

However, none of the stores offered a credit contract or financial table to our shopper. In one store, our shopper specifically asked about this documentation and was told it was only available online. We view this as a potential breach of the National Consumer Credit Protection Act.

CHOICE verdict

More broadly, we view the exemption for retailers as another trap, and one that can lead to consumers being misinformed about the credit deals they are signing up for. 

A spokesperson for Assistant Treasurer and Minister for Financial Services and Superannuation Bill Shorten told us the government also has concerns and will release a discussion paper by the end of this year. “The decision to exempt point-of-sale retailers was made with a view to balancing the regulatory burden on retailers against the Government’s intention to bolster consumer protection,” the spokesperson said. 

“It was always intended that the exemption would be subject to further review. The exemption was provided on the basis the financier remains responsible for the conduct of the point-of-sale retailer.” 

CHOICE supports an official review of the exemption and welcomes a recent change to disclosure requirements that should make shoppers better informed. From July next year all credit card applicants including those applying in store will receive a mandatory key fact sheet outlining interest rates, fees and charges. 

We gave the retailers and related finance providers the opportunity to comment on the results of our shadow shop and were told by some that full disclosure of fees, interest rates and conditions would be provided after the shopper fills out the application for the credit card but before the credit contract was signed. We could not confirm this as our shadow shopper did not go through with the application and purchase the goods. 

Nevertheless, we believe all financial details should be provided up front, not at the backend of the process when customers may already feel committed. This is particularly important because the amount and structure of fees associated with flexible payment deals vary significantly from offer to offer and many of these offers can end up being bad deals for consumers. 

For more on the pitfalls of interest-free deals, see our report in the December/January issue of CHOICE magazine.



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