Online consumer goods retailer Snaffle is being sued over allegedly inflated prices and unlawful interest charges on thousands of contracts.
ASIC Deputy Chair Sarah Court said it would allege Snaffle inflated the cost of household goods and electronics such as washing machines, fridges and mobile phones, and applied the unlawful interest charges under its credit contracts.
Ms Court said Snaffle’s pricing structure circumvented a cap on the costs that could be imposed under credit contracts, allegedly resulting in customers paying hundreds of dollars more in interest payments than they should have.
She said court documents outlined a number of individual credit contracts and detailed how the Annual Cost Rate, which is capped at 48 percent, was allegedly breached by Snaffle, resulting in cost and interest charges of between 60 percent and 103 percent.
“In addition, Snaffle is alleged to have failed to disclose the cash price and true cost of the credit provided under each of the contracts, as required by the National Credit Code (NCC).”
Ms Court said, separately, ASIC alleged 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 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.”
Example contracts
- A 7.5kg front loading washing machine which retailed for a cash price of $477 was sold for a total amount of $1549 to be paid over three years. ASIC contends the consumer paid up to $648 more than they should have for this product.
- A 315L top mount frost free fridge which retailed for a cash price of $797 was sold for a total amount of $2340, to be paid over the three years. ASIC contends the consumer paid up to $835 more than they should have for this product.
- A mobile phone which retailed for a cash price of $1487 was sold for a total amount of $4246 to be paid over three years. ASIC contends the consumer paid up to $1433 more for this product than they should have.
