Diners Club Direct Mail Advertisement
Meeting 12 October 2010
Complainant: K. Thomas
Advertisement: Diners Club (NZ) Limited
Complaint: The Complainant received a letter as part of a direct mail campaign by Diners Club New Zealand that was advertising the launch of a new personal credit card which had a pre-approved credit limit set at $15,000. The promotional letter from Diners Club advised the Complainant that the credit card, with its pre-approved credit limit of $15, 000, would be sent to them, and any supplementary card members, in the mail in the next 5 business days. Information was included at the end of the letter that advised the Complainant that if they did not wish to receive the card, that they should call Diner Club Direct Mail on a toll-free number to decline the offer.
Complainant, K. Thomas, said:
Type: Direct Mail
Where: Received in Post today
Product: Personal Credit Card
Letter states that I and any supplementary card members will receive a new personal credit card with a 15k limit, and if I don't want to receive it I must call a 0800 number to decline. This for on promotion is unacceptable!
The Chairman ruled that the following provisions were relevant:
Code for Financial Advertising
Basic Principle 2 - Financial advertisements should observe a high standard of social responsibility particularly as consumers often rely on such services for their financial security.
The Advertiser, Diners Club(NZ) Ltd, said:
I refer to your correspondence received 25th August 2010 and our subsequent conversation on Friday 27th regarding the complaint from K. Thomas. Diners Club (NZ) Limited (Diners Club) would like to make the following comments.
K. Thomas has complained about Diners Club's letter to him of 5 August 2010 headed Introducing the new Diners Club Personal Credit Card. In particular, K. Thomas' complaint appears directed at the penultimate paragraph of the letter which indicates that if the customer does not wish to receive a new Credit Card, or does not want any supplementary card members to receive a card, the customer is asked to call Diners Club's 0800 DINERS customer service number.
In your letter of 23 August 2010 you indicate the relevant section in the ASA's Advertising Codes of Practice is Basic Principle 2 of the Code for Financial Advertising which provides:
Financial advertisements should observe a high standard of social responsibility particularly as consumers often rely on such services for their financial security.
Diners Club is a strong believer in socially responsible lending and has in place highly responsible lending practices. Indeed it is not in our vision or business strategy to offer credit, charge card and loan facilities to customers who cannot settle their accounts.
We recently upgraded our Card Management System to enable the provision of a credit card product for our existing and new customers. In part this was a response to requests by a large number of our customers for credit card functionality to allow them the option of either paying their account in full or spreading payments for large purchases over time. We have received an overwhelmingly positive response to the new card programme.
The letter sent to K. Thomas, who is an existing Diners Club Charge Card Account Holder, was part of the new service offer to Diners Club's existing loyal customers with excellent credit history. We can assure you this was not a random mail offer to the public at large.
The credit limit offered to K. Thomas is the limit on his Charge Card and takes into account both his previous spending and exceptional credit history with Diners Club. Cardmembers who are offered the new Credit Card are under no obligation to take up the offer. The letter to K. Thomas indicates the offer was staged. Firstly, there was the letter introducing the Credit Card product, advising that a Credit Card would be made available to the cardmember, and giving the card member the opportunity to call us (for free) if they did not want to receive the card.
The second stage of the offer is that the credit card is then sent separately to the cardmember. The FAQ provided with the Credit Card states:
What if I do not want the new Credit Card?
If for any reason you do not wish to keep the new Credit Card, please cut it in half and return it to us at: Diners Club (NZ) Limited, Freepost 2015, PO Box 1533, Shortland Street, Auckland 1140. ...
In sending the initial letter introducing the new Credit Card to existing cardmembers, Diners Club NZ was aiming to give cardmembers, like K.Thomas, the opportunity to decline receiving the new Credit Card at all.
The Codes of Practice indicate that the word advertisement is to be interpreted in its broadest sense and includes direct mail. However, Diners Club request that the Complaints Board recognise that K. Thomas is a charge card account holder with Diners Club, and as such has a pre-existing contractual relationship with Diners Club which is covered by the Charge Card Account and Club Rewards Terms and Conditions. Those terms provide that:
We and our related companies may use your personal information to communicate with you in future, including about other services offered by us and / or any related companies. If you do not wish to receive this information please contact us on 0800 DINERS - 0800 346 377.
Diners Club's letter:
- Was made within the bounds of that contract.
- Was sent to a cardmember with a demonstrated excellent credit history under that pre- existing relationship.
- Expressly provided a free mechanism for the cardmember to decline the new Credit Card before Diners Club delivered the card.
No advertising agency was involved with this offer.
Diners Club submits that we are not in breach of Basic Principle 2 of the Code for Financial Advertising and that the complaint against us should not be upheld. We refer the Complaints Board to its Decision 07/364 - where a similar type of complaint against GE Money was not upheld.
We take on the concerns expressed by K. Thomas and apologise to him for having caused him any offence - that was not our intention.
As K. Thomas has been a loyal cardmember, I would appreciate that he either contact myself directly to address his concerns or our great customer services team in Auckland who have a long history of serving our customers.
You have asked us not to make any direct contact with K. Thomas concerning the complaint. We understand that K. Thomas will receive a copy of this letter from the Authority. Please advise if this is not the case.
K. Thomas' issue appears to be that he was required to take the step of declining the new Credit Card offer by calling our 0800 number. As a result of being notified by the Authority of the complaint, we have reviewed our correspondence and in future will make it clearer through the FAQ's that our customer is under no obligation to take up the offer.
We look forward to resolution of this matter by the Complaints Board but in the meantime please contact me if you require any further information.
The Complaints Board carefully read all correspondence in relation to the complaint, and viewed a copy of the advertisement sent to the Complainant by Diners Club. It noted the issues raised by the Complainant in relation to the advertisement, specifically the unsolicited nature of the promotion and the fact that the Advertiser would send credit card to them if they did not opt out of the offer by their own volition.
When assessing whether a letter as part of a direct mail campaign constituted an advertisement, the Chairman noted that it stated in the Advertising Codes of Practice that "The word 'advertisement' is to be taken in its broadest sense to embrace any form of advertising and includes advertising which promotes the interest of any person, product or service. ... Other examples include posters, pamphlets and billboards (whether stationary or mobile) and addressed or unaddressed mail." As such, she ruled that the material sent to the Complainant by Diners Club was an advertisement, and directed the Complaints Board to consider the advertisement with reference to Basic Principle 2 of the Code for Financial Advertising. This required the Complaints Board to consider whether or not the advertisement observed a high standard of social responsibility, particularly as consumers rely on such services for their financial security.
The Complaints Board then turned to the response from the Advertiser that emphasised that the offer contained in the advertisement was staged in two parts, and that potential customers were given two chances to decline the offer - upon receipt of the offer the customer could call Diners Club New Zealand free to decline the offer, or, if the customer was automatically sent the card because they had not contacted the Advertiser, information contained in the FAQ that accompanied the credit card advised the customer to cut the card in half and return it to Diners Club New Zealand.
In their response, the Advertiser also pointed out that that the Complainant was already a Diners Club Charge Card account holder, and that the offer contained in the advertisement was only extended to existing Diners Club account holders, and was not "a random mail offer to the public at large". Given a pre-existing contractual relationship existed between the Complainant and Diners Club, the Advertiser said it was entitled to advertise new products to its members, and referred the Complaints Board to its Decision (07/364) - where a similar type of complaint against GE Money was not upheld.
The majority of the Complaints Board had concerns with this type of financial advertising, and was of the opinion that advertisements that offered customers a credit card with a pre-approved $15,000 limit were problematic. The majority also noted that while the Complainant had an existing Diners Club Charge Card, they were not a credit card holder, and it was the majority view that there was a significant distinction between a charge card account and a credit account. In light of these findings, the majority found that the advertisement had not been prepared with the requisite high standard of social responsibility required under Basic Principle 2 of the Code for Financial Advertising.
A minority of the Complaints Board disagreed. While also expressing concerns about unsolicited financial advertising that offered credit to customers, the minority concurred with the Advertiser that there was a pre-existing contractual relationship between the Complainant and Diners Club, and that relationship allowed Diner Club to advertise new products to existing members. The minority was also of the view that the Advertiser had imparted adequate information to the Complainant in the FAQ section that accompanied the advertisement, and that it was clearly stated in advertisement how the Complainant could decline the credit offer, and as such, the minority found that the Advertiser had met the high standard of social responsibility required under Basic Principle 2 of the Code for Financial Advertising.
However, in accordance with the majority, the Complaints Board upheld the complaint.
Decision: Complaint Upheld
 Advertising Standards Authority, Advertising Codes of Practice - August 2010, p.16.