Radio Rentals ordered to pay $2M in penalties over leasing practices
- 16 May, 2018 16:03
Radio Rentals has been ordered to pay $2 million in penalties related to an investigation over the business' lending obligations.
The court order comes after the Australian Securities and Investments Commission (ASIC) launched investigations into the legal practices of Thorn Australia – Radio Rentals' parent company – paying particular attention to whether people signing up to leases offered by the company had the capacity to pay.
Radio Rentals leases a range of consumer IT goods from the likes of Acer, Apple, Microsoft, Samsung and Sony, along with electronics, whitegoods and appliances to consumers.
ASIC found breaches relating to more than 270,000 leases entered into between January 2012 and May 2015.
The Federal Court of Australia handed down the order on 16 May, finding that Thorn Australia failed to make the necessary inquiries and take steps to verify the financial situation of its customers, and failed to conduct a proper assessment of the suitability of the leases it provided.
In January, ASIC announced what it calls a package of regulatory outcomes against Radio Rentals, RR and Rentlo Reinvented, all part of Thorn Australia group of companies.
This was the result of, according to ASIC, the businesses' past poor conduct towards customers and also in order to protect future customers.
The January package included $6.1 million in refunds to customers and write-offs of default fees, and $13.8 million in customer refunds of excess lease payments.
By 23 January when the decision was made public, Radio Rentals had already returned approximately $11.8 million of the $13.8 million to customers who overpaid.
ASIC then lodged civil penalty proceedings with the Federal Court of Australia where Thorn admitted to four contraventions by Radio Rentals of the National Credit Act in respect of each of the 275,060 consumer leases it entered into in from 23 January 2012 to 1 May 2015.
At the time, it was revealed that ASIC and Thorn would file papers in the Federal Court make joint submissions that the appropriate penalty to be paid by Thorn is $2 million.
Radio Rentals is already providing refunds to customers and will contact all affected customers by 7 November 2018.
As a result of the Federal Court of Australia order, Thorn will also pay ASIC $240,000 for investigation and court costs.
"Today’s penalty reinforces the need to uphold high standards of conduct in the consumer leasing industry," ASIC deputy chair Peter Kell said.
"The law requires lenders to verify a consumer’s financial situation to make sure that consumers are not being put into unaffordable loans or leases’.
Radio Rentals is a household appliance, technology and furniture rental company with over 70 stores Australia and more than 500 employees. The company is a trademark of Australian Securities Exchange-listed Thorn Group (ASX:TGA).