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Wednesday 16 May 2018

18-139MR ASIC action results in $2 million penalty for Thorn’s Radio Rentals handed down by the Federal Court today

The Federal Court of Australia today ordered a $2 million penalty against Thorn Australia Pty Ltd's (Thorn’s) Radio Rentals for contravening its responsible lending obligations.

In handing down the penalty, the Court found that Thorn 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.

The court will publish its written judgment in due course.

This outcome follows an investigation by ASIC into Thorn’s leasing practices, focusing on whether people signing up to the leases had the capacity to pay. The breaches relate to more than 270,000 leases entered into between January 2012 and May 2015.

Thorn will also be paying ASIC's court and investigation costs of $240,000.

ASIC’s Deputy Chair Peter Kell said ‘Today’s penalty reinforces the need to uphold high standards of conduct in the consumer leasing industry. 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’.

Background

On 23 January 2018 ASIC announced a package of regulatory outcomes against Thorn's consumer leasing businesses Radio Rentals, RR and Rentlo Reinvented, to address past poor conduct and protect future customers. The package of outcomes included $6.1 million in refunds to customers and write-offs of default fees, and an additional $13.8 million in customer refunds of excess lease payments.

On the same day, ASIC lodged civil penalty proceedings with the Federal Court of Australia. In these proceedings, 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.

Radio Rentals is providing refunds for affected customers as part of its Enforceable Undertaking to ASIC. Radio Rentals will contact all customers who are eligible for a refund or write-off by 7 November 2018. If you are eligible, you may be contacted by a phone call, text message, email or posted letter. For more information see Radio Rentals Refunds.

Other recent consumer lease and rent-to-own outcomes include:

  • 20 July 2017: The Rental Guys refunded $100,000 to customers from NSW regional Indigenous communities after ASIC found they had failed to meet their responsible lending obligations when renting white goods and furniture.
  • 23 November 2016: ASIC cancelled the credit licence of Rent to Own after finding it had actually entered into credit contracts (that purported to be consumer leases) and charged an annual interest rate more than the allowable maximum of 48%. 

ASIC’s MoneySmart website has information about how consumer leases work, including a rent vs buy calculator so consumers can work out the real cost of a consumer lease.

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Last updated: 16/05/2018 02:52