Radio Rentals agrees to $6.1m customer payout and $2m fine
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The company behind Radio Rentals, Thorn Group, has agreed to pay $6.1 million to consumers as well as a fine as much as $2 million after breaches of responsible lending practice.
In a settlement struck between Thorn and the corporate watchdog, default fees and charges relating to 60,000 leases between January 1, 2012 and May 1, 2015 will be paid out – a bill which will be as much as $6.1 million.
“As part of the settlement, Thorn will admit to certain contraventions of its responsible lending obligations and pay a civil penalty of $2 million, an amount which is subject to the final decision of the Federal Court of Australia. It is expected the matter will be heard during the first half of 2018. ” they told the market on Tuesday.
The investigation centred on the failure of Radio Rentals to determine whether someone taking out a lease had the capacity to pay.
Acting ASIC Chair Peter Kell said: “Consumer lease customers tend to be vulnerable consumers in tight financial circumstances. Lease providers must ensure that they comply with their responsible lending obligations and should be engaging with their customers fairly. If customers are paying more than what is required, lease providers need to promptly fix this or face regulatory action.”
Radio Rentals also needs to roll out a new plain English lease contract by June 2018 this year and work with ASIC to improve communications with customers whose leases are ending or have ended.
Acting CEO Peter Forsberg told investors the settlement was a turning point for the company.
“I am pleased we have reached this resolution with ASIC and the changes we have made to the consumer leasing division put it on a sound footing to meet the needs of its customers and satisfy its responsible lending obligations,” he said.
“Thorn’s consumer leasing business is the largest in Australia and it is now positioned to strengthen its offering in this segment.”
Shares in the company were trading up 3 per cent in lunch trade, at 82c.
Thorn has not traded over $1 since its profit downgrade in October, when it plummeted 35 per cent.
They say they have learnt their lesson and that their consumer leasing operations are now up to scratch – paving the way to tap into the 75 per cent of customers who say Radio Rentals is the only way for them to access essential household goods.
In its latest half year results, the Thorn group posted a loss of $9.67 million.
Additional reporting from Business Insider Australia.