The Australian Securities and Investments Commission launched the legal action in the Federal Court on Wednesday, saying Harvey Norman and credit provider Latitude Finance Australia promoted "no deposit" and "interest free" payment methods between January 2020 and August 2021.
It's alleged the ads were misleading because they didn't disclose customers had to use a Latitude Go Mastercard to be eligible for the scheme, and they didn't accurately show the true cost of the payment method by failing to state establishment and monthly account service fees.
ASIC's deputy chair Sarah Court said it was concerning the advertising didn't give customers a complete picture.
"Consumers have a right to make informed choices ... credit providers and retail partners such as Latitude and Harvey Norman should ensure that their advertising clearly discloses all important information about payment methods and any fees," she said.
"These credit cards, ASIC alleges, attracted substantial fees over the course of the 60-month payment term, and exposed consumers to the risks of incurring further debts and charges, as well as potentially affecting their credit rating."
ASIC says anyone who made a purchase at Harvey Norman and signed up to the credit card after March 16 last year would be liable to pay at least $537 in fees on top of their purchase amount over 60 months.
Latitude acknowledged the court action in a statement.
"Latitude takes these allegations very seriously and has worked cooperatively with ASIC during its investigation," it reads.
"Latitude is now reviewing ASIC's claim and will not be commenting further at this stage given the matter is before the courts."
Harvey Norman has been contacted for comment.
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