ASIC is suing Snaffle (operated by Walker Stores Pty Ltd) alleging it inflated the cost of household goods and electronics such as washing machines, fridges and mobile phones, and applied unlawful interest charges under its credit contracts.
ASIC alleges Snaffle's pricing structure circumvented a cap on the costs that can be imposed under credit contracts (the Annual Cost Rate), which is designed to protect consumers, allegedly resulting in customers paying hundreds of dollars more in interest payments than they should have.
Court documents filed by ASIC outline three individual credit contracts and detail how the Annual Cost Rate, which is capped at 48%, was allegedly breached by Snaffle, resulting in cost and interest charges of between 60% and 103%.
In addition, Snaffle is alleged to have failed to disclose the cash price and true cost of the credit provided under each of the three contracts, as required by the National Credit Code (NCC).
Separately, ASIC alleges as many as 40,430 credit contracts may have had a flat interest rate incorrectly applied to the full purchase cost of the goods for the whole term of the contract, rather than interest being calculated on the unpaid balance which reduces over time as required by the NCC.
ASIC Deputy Chair Sarah Court said Snaffle's actions appeared to prioritise the company's financial interests over Australia's credit laws which provide important consumer protections.
'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.
'The rate cap is intended to protect consumers from excessive credit costs and potentially exploitative lending practices and should not be applied in a way that artificially inflates the cost of an item at the customer's expense.
'Credit providers must give customers a clear understanding of the financial obligation they are agreeing to when they enter any credit contract.'
Deputy Chair Court said a new review of consumer lease providers by ASIC published today showed that since consumer lease protection reforms were introduced in 2023, many providers that previously offered consumer leases for household goods had left the sector to move into alternate credit products that can involve other risks for 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.'
ASIC is seeking declarations against Walker Stores of breaches of various provisions of the NCC, pecuniary penalties, injunctions and adverse publicity orders.
Background
ASIC alleges the pricing of the consumer goods sold via the Snaffle website involved a company related to Walker Stores purchasing goods from suppliers, including from retailers at retail price. It then increased the cost of the goods and sold them to the 'Aspire 42' corporate group of which Walker Stores is a part. Walker Stores then increased the cost of the goods again and sold them to consumers, with interest added on top of the already inflated price.
Under the NCC, a credit provider must not enter into a credit contract if the Annual Cost Rate exceeds 48%. That rate is determined by a formula that takes account of fees, interest and charges and the timing of repayments.
The NCC also prescribes the key information that must be disclosed to consumers in a credit contract and requires interest to be calculated on the reducing balance of the loan over time and not on a flat rate basis.
In each of the three cases outlined in ASIC's court documents, two alternative approaches to calculating the Annual Cost Rate of interest were applied to the inflated prices Snaffle allegedly charged consumers. In each example they exceeded the 48% Annual Cost Rate cap.
Example Contract A - Washer
A 7.5kg front loading washing machine which retailed for a cash price of $477 was sold for a total amount of $1,549 to be paid over three years.
ASIC contends the consumer paid up to $648 more than they should have for this product.
Example Contract B - Fridge
A 315L top mount frost free fridge which retailed for a cash price of $797 was sold for a total amount of $2,340, to be paid over the three years.
ASIC contends the consumer paid up to $835 more than they should have for this product.
Example Contract C - Phone
A mobile phone which retailed for a cash price of $1,487 was sold for a total amount of $4,246 to be paid over three years.
ASIC contends the consumer paid up to $1,433 more for this product than they should have.
