Radio Rentals pays substantial penalty – wake up call for credit licensees

Thorn Australia Pty Ltd (t/as Radio Rentals) has been slapped with a $2 million penalty by the Federal Court of Australia and will pay ASIC’s court and investigation costs totalling $200,000 for contravening its responsible lending obligations under the National Consumer Credit Protection regime.

ASIC’s investigation on Radio Rentals focused on their leasing practices and specifically whether consumers were signed up to leases that were unsuitable for them in light of their financial situation.

Specifically, the Court found Radio Rentals failed to:

  1. Make reasonable inquiries about consumers’ financial situation. They failed to make inquiries as to each consumer’s actual housing costs before making any assessment as to unsuitability; and
  2. Take reasonable steps to verify each consumer’s financial situation. Radio Rentals did not verify each consumer’s actual expense before making any assessment as to unsuitability.

This was not a once off mistake. The joint court submissions by ASIC and Radio Rentals revealed that over 275,000 leases were entered into between January 2012 and May 2015 on credit assessment models that were inadequate.

The $2 million penalty follows a range of other regulatory sanctions agreed against Radio Rentals earlier in 2018, including a Court-enforceable Undertaking, and almost $20 million in refund payments to affected consumers.

This is a wake up call for credit licensees in the consumer leasing space – are you sure you are compliant?

Macpherson Kelley regularly advises both financiers and brokers in the consumer credit space.  For further information and assistance, contact Kelly Dickson.

This article was written by Aylmer Low, Lawyer – Commercial.