You'd think you'd have to apply to a bank or other financial institution to get your hands on a credit card. And that the issuer would carefully assess your financial situation to determine whether you can manage the card without slipping into debt.
There's even a name for this process – responsible lending. And it happens to be the law. But one of Australia's highest profile retailers, Harvey Norman, apparently didn't get the memo.
You'd think you'd have to apply to a bank or other financial institution to get your hands on a credit card
Based on evidence gathered by some of our friends and allies in the consumer rights movement, Harvey Norman is a business with a knack for signing customers up for credit cards right there in the store without properly checking how suitable the card is for them.
More often than not, the credit card in question can be traced back to one of Australia's most predatory finance companies – Latitude Finance.
Simply put, Latitude is a company that seems to specialise in driving people into debt. When we recently ranked the 10 credit cards with the highest interest rates in Australia, Latitude had four cards in the top five, with interest rates ranging from 21.99% to 24.99%.
Rates this high can really hurt people, many of them already doing it tough because of COVID-19 – especially when they can only afford the minimum monthly repayment and the cost of the loan blows out exponentially.
Issuing credit cards at point of sale isn't illegal, but we think it should be
Making only the minimum repayments on a $5000 Harvey Norman Latitude Mastercard Go at 22.74% would mean paying $17,909 over the 29 years and eight months it would take to pay off the loan ($12,909 in interest).
Issuing credit cards at point of sale isn't illegal, but we think it should be. Putting a stop to the practice was also a recommendation of the banking royal commission. But at least one major retailer is dead set against the idea: Harvey Norman.
We've seen cases of Harvey Norman pushing Latitude credit cards at point of sale and encouraging customers to buy items on finance they didn't need or ask for – and of suggesting $12,000 limits when the product being sold cost a fraction of that sum. The customer may well be signing up for an interest-free deal, but they end up with a credit card with a very high interest rate that is applied to other purchases and cash advances. All of which we find very shonky indeed.
We've seen cases of Harvey Norman suggesting $12,000 limits when the product being sold cost a fraction of that sum
As CHOICE campaigner Patrick Veyret puts it, "financial counsellors and community legal centres across Australia have seen that Latitude credit cards sold at Harvey Norman harm people experiencing financial vulnerability."
Recent spot checks by CHOICE mystery shoppers revealed that it's still easy for anyone to sign up for a high-interest credit card in Harvey Norman stores, even when they're not employed.
"Harvey Norman has one of the most expensive credit cards on the market," says Veyret. "Most people would be shocked to find that 1.9 million Australians struggle with credit card debt. Credit card debt affects your relationships, your sense of being in the world, your sense of community, your work, your mental health.
"Something needs to be done about Harvey Norman and Latitude charging 22.74% interest rates." (Even worse, the rate jumps to an eye-watering 25.90% on outstanding balances.)