Imagine you stumbled upon a Latitude (ASX: LFS) ad that says it allows you to do a 60-months interest free installment just when you were about to reluctantly pay Harvey Norman a couple thousand dollars in a lump sum. You went all bright-eyed and bushy-tailed. Getting an extra 5 years to pay off your new appliances seemed like a brilliant idea. Soon, you discovered that you’d actually have to sign up to one of their credit card programs to be eligible for the installment. “Okay, this wasn’t mentioned on the previous page, but I’ll do it”, you whispered to yourself. 

Little did you know, that wasn’t the only thing that Latitude and Harvey Norman failed to mention. When you received your credit card bill some time later, you were charged a few hundred dollars as an ‘account fee’ and a ‘service fee’ on top of the purchase amount. 

 The above narrative isn’t just hypothetical. It happened to many Australians who purchased through Harvey Norman using a Latitude GO Mastercard between January 2020 and August 2021. The Australian Securities and Investments Commission (ASIC) is now taking Latitude and Harvey Norman to court over the allegations of misleading advertisement. 

ASIC claims that ads that promoted ‘no deposit’ and ‘interest free’ payments didn’t disclose that consumers could only access these benefits if they applied for a Latitude GO Mastercard, and the advertisements did not accurately represent the cost of using that payment method because it didn’t outline monthly account fees and sign-up fees for the card. ASIC claims that customers who signed up for a GO Mastercard between March and August of 2021, made a purchase at Harvey Norman and paid it off over a 60-month period would be charged at least $537 in fees.

So who is Latitude, the company who partnered up with retail giant Harvey Norman and boasts 60-month interest free installments? The Company was formerly known as GE Capital Finance and backed General Electric’s financial services division. In 2015, GE Capital sold the business to a consortium led by Deutsche Bank, KKR and Värde Partners, and renamed the business as Latitude Financial Services. Though only being around for seven years, Latitude has been experiencing many turbulences. From having to endure major cashburn due to two failed IPOs, terminating an acquisition agreement with fellow Buy Now Pay Later (BNPL) provider Humm (ASX: HUM), and a plummeting share price from $2.50 per share at IPO all the way to $1.30 per share in October 2022.

Their misfortunes did not seem to end there. Latitude’s profits have fallen every year as the BNPL industry itself struggles with bad debts and consumer overspending habits. Moreover, increasing interest rate is slowing down consumer lending – which is their main product offering. Latitude reported statutory NPAT of $30.6 million in 1H22,  down 57% on 2H21 and down 66% on 1H21. 

Latitude’s third IPO attempt was successful in April 2021 under the former CEO of Australia Post (Auspost) and NAB, Ahmed Fahour. Fahour was handsomely compensated for successfully floating the business to the ASX. According to Latitude’s FY21 annual report, he received a bonus of $22.5m in addition to his base salary of $1.6m and $540k worth of shares. During his time at Auspost, Fahour went through a similar situation when he received $5.6m remuneration – made up of $4.4m in salary and superannuation, and a $1.2m bonus between 2015-2016. This figure is approximately 119 times the remuneration of an average postie. While it is good for Fahour that his enormous salary not be affected, Auspost incurred a $221.7m loss in FY15, which happened to be its first loss ever since the company underwent corporatisation in 1989. Fahour has defended his salary as consistent with that paid to his private sector counterparts as the former CEO of National Australia Bank. Fahour finally announced his departure in July 2017 from Auspost after his salary received public scrutiny, mainly due to pay inequality and allegations of overspending taxpayer money. 

Though Fahour has fulfilled his mandate to float Latitude on the ASX, the company’s deteriorating financial health and plummeting share price convinced him to end his tenure at Latitude. Fahour announced that he will depart Latitude in August 2023 a month prior to the ASIC lawsuit, in which he luckily dodged a bullet as most of ASIC’s lawsuit against Latitude will likely be inherited by his successor. Fahour certainly didn’t share his luck with Latitude as the lawsuit will just add another financial burden to their series of misfortunes. As of 6 October 2022, both Latitude and Harvey Norman have yet to release a response regarding the lawsuit. Nevertheless, the legal costs that will occur will just sink Latitude’s bank balance further, so we wish the best of luck to Fahour’s successor who will have a tough job carrying the company back to health.