The Australian Securities & Investments Commission (ASIC) lawsuit against AmEx Australia relates to two credit cards co-branded with retailer David Jones.

ASIC says that AmEx knew that some consumers were confused about whether they had applied for a credit card or just a loyalty card. AmEx should have stopped issuing the cards, says the suit, but did not until July.

In addition, the firm knew that the cancellation rates for people who applied for the credit cards in David Jones stores were high - significantly higher than for cards applied for online.

ASIC Deputy chair Sarah Court says: "The design and distribution obligations embed a consumer-centric approach for the issuers and distributors of financial products.

"Product providers must monitor and review whether consumers are receiving products consistent with their needs and cannot bring a ‘set-and-forget mindset’ to product governance. It is critical that providers respond to poor outcomes they identify by making changes."

ASIC is seeking "declarations and pecuniary penalties".