Offering instalment payment options can be a powerful tool to attract customers. However, as the recent legal action against online retailer Snaffle by the Australian Securities and Investments Commission (ASIC) demonstrates, it’s crucial for businesses to ensure their credit pricing practices meet price compliance standards and are transparent and lawful under Australian regulations.

 

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Understanding Credit Based Pricing Model and Why Price Compliance Matters

 

Credit payment pricing refers to how businesses set the total cost of products or services sold through instalment plans—where customers pay in smaller amounts over time instead of upfront. This pricing includes not just the product’s base price, but also any interest, fees, or added charges. 

 

In Australia, strict laws cap the effective interest rate at 48% per year, and businesses must ensure all extra costs are fair, clearly disclosed, and legally compliant. Done right, credit payment pricing helps customers access what they need. Done poorly, it can lead to overcharging, legal trouble, and loss of trust.

 

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What the Snaffle Case Teaches Us About Price Compliance Failures

 

Snaffle, an online retailer specialising in household and tech items, is facing allegations from ASIC for overcharging customers through inflated prices and excessive interest rates on credit contracts. The National Credit Code in Australia caps the annual cost rate (inclusive of interest, fees, and charges) at 48%. However, ASIC claims that Snaffle’s pricing structure resulted in customers paying between 60% and 103% in some cases.

 

For instance, a customer reportedly paid $1,549 over three years for a washing machine with a retail price of $477, significantly exceeding the legal cost cap. Such practices not only breach legal requirements but also erode customer trust.

 

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The Role of Transparency Rules in Price Compliance

 

A common pitfall for businesses is advertising low weekly or monthly payments without clearly disclosing the total repayment amount. While this approach may initially attract customers, it can lead to confusion and dissatisfaction when the full cost becomes apparent.

 

Transparency in pricing is not just a legal obligation; it’s a cornerstone of building lasting customer relationships. Customers appreciate clarity and honesty, especially when it comes to financial commitments. Providing a clear breakdown of the total cost, including interest and fees, empowers customers to make informed decisions and fosters trust in your brand.

 

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Ensuring Legal Compliance in Setting Credit Prices

 

Australian law mandates that interest on credit contracts be calculated based on the unpaid balance, not the original purchase price. This means that as customers make payments, the interest charged should decrease accordingly. Applying a flat interest rate on the full purchase amount for the entire term, as alleged in the Snaffle case, contravenes this requirement.

 

Moreover, businesses must avoid adding arbitrary fees, such as inflated delivery charges or internal mark-ups, that artificially increase the cost of goods. Such practices not only breach legal standards but also risk damaging your company’s reputation.

 

 

 

Ensuring Fair Pricing Beyond Price Compliance and Transparency Laws

 

Beyond legal compliance, ethical considerations play a vital role in pricing strategies. Customers, particularly those facing financial challenges, are vulnerable to exploitative practices. Offering fair and reasonable credit terms demonstrates a commitment to customer welfare and can differentiate your business in a crowded market.

 

Fair pricing involves assessing the affordability of repayment plans for customers and ensuring that the terms are not only legally compliant but also considerate of customers’ financial situations. This approach not only mitigates legal risks but also enhances customer loyalty and brand integrity.

 

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The Role of Pricing Teams in Upholding Price Compliance Standards

 

Pricing teams are key to delivering credit pricing that’s both transparent and compliant. Their work directly shapes how customers experience instalment plans—and how much trust they place in the business.

 

Regular Audits help catch issues early. By reviewing pricing structures routinely, teams can ensure they stay within legal limits like Australia’s 48% annual cap and avoid hidden costs slipping through.

 

Training and Education keep the team sharp. With laws and best practices evolving, regular updates help pricing staff spot risks, challenge unfair strategies, and stay ahead of compliance requirements.

 

Customer Communication turns complex terms into clear, relatable information. Simple repayment calculators, honest examples, and upfront full-cost breakdowns help customers understand exactly what they’re agreeing to.

 

When pricing teams take the lead in these areas, they reduce legal risk and build a reputation for fairness that lasts.

 

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Embracing Transparency as a Strategic Advantage

 

The Snaffle case is a clear reminder of what can go wrong when transparency and price compliance in credit pricing are overlooked. In a market where consumers expect fairness, businesses that offer clear and lawful pricing not only stay out of trouble—they also stand out.

 

By focusing on transparency, legal price compliance, and ethical pricing, you can build lasting trust, earn customer loyalty, and strengthen your brand.

 

Staying on top of price compliance doesn’t have to be overwhelming. With the right approach, you can protect your business and serve your customers better. If you’re unsure where to start or want to review your pricing setup, we’re here to help. Let’s talk about how your strategies can work smarter for everyone.

 

For a comprehensive view of integrating a high-performing capability team in your company, Download a complimentary whitepaper on How to Avoid Pricing Chaos.

 

Are you a business in need of help aligning your pricing strategy, people and operations to deliver an immediate impact on profit?

If so, please call (+61) 2 9000 1115.

You can also email us at team@taylorwells.com.au if you have any further questions.

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