Online household goods and electronics store Snaffle is facing a lawsuit from the Australian Securities and Investments Commission (ASIC) for allegedly inflating prices of items and charging illegal interest under credit contracts.
These items include washing machines, fridges, and mobile phones.
According to ASIC, Snaffle’s pricing structure bypassed the Annual Cost Rate cap established to protect consumers, leading to customers being charged hundreds of dollars more in interest than allowed under credit contracts.
In court filings, ASIC identifies three credit contracts in which Snaffle allegedly breached the 48 percent Annual Cost Rate cap, with total cost and interest charges ranging from 60 percent to 103 percent.
ASIC also says Snaffle did not disclose the cash price and actual cost of the credit in any of the three contracts, violating the National Credit Code (NCC).
ASIC claims that up to 40,430 credit contracts have a flat interest rate misapplied to the total purchase price of the goods for the duration of the agreement, instead of calculating interest on the declining unpaid balance as mandated by the NCC.
ASIC Deputy Chair Sarah Court stated that Snaffle’s conduct appeared to favour its own financial gain above compliance with Australia’s credit laws that protect consumers.
“ASIC alleges Snaffle charged customers a substantial markup on products, as well as a delivery fee they did not incur, operating costs, a profit margin and additional adjustments – all before significant interest was applied, resulting in an unlawful credit contract,” said Court.
“Credit providers must give customers a clear understanding of the financial obligation they are agreeing to when they enter any credit contract.”
Court noted that ASIC’s latest review of consumer lease providers indicates that numerous providers had exited the household goods leasing market and shifted to other credit products, which may pose additional risks to consumers.
“Enforcement action against misconduct by credit providers and predatory lending is a key enforcement priority for ASIC and we will continue to hold to account any business that we consider has exploited consumers by breaching these important consumer protection laws,” said Court.