The Thorn Group has settled with the corporate regulator ASIC (Australian Securities and Investments Commission) a long-running investigation into breaches of responsible lending practices by its consumer leasing business Radio Rentals.
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.”
As part of the deal with ASIC, Thorn will pay a civil penalty of $2 million.
It will also refund or write-off $6.1 million in default fees and charges relating to 60,000 leases.
ASIC says there will an additional $13.8 million in customer refunds of excess lease payments.
Thorn has admitted to four contraventions by Radio Rentals of the National Credit Act over 278,683 consumer leases between January 2012 and May 2015.
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.
The Federal Court still needs to ratify the deal.
A short time ago, Thorn shares were up 3.1% to $0.815.
Thorn says it already has made significant changes to the way it conducts its consumer leasing.
“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,” says acting CEO of the Thorn Group, Peter Forsberg. The CEO James Marshall left in April last year.
“Thorn’s consumer leasing business is the largest in Australia and it is now positioned to strengthen its offering in this segment. Consumer leasing is an important part of the financial system, as research shows that 3 million Australians are excluded from the financial mainstream.”
Radio Rentals business has been hit by a weak retail market and adverse publicity over the ASIC investigation.
In its latest half year results, the Thorn group posted a loss of $9.67 million.
In South Australia, the business is known as RR Rentlo Reinvented. Another, unrelated, entity trades under the name Radio Rentals in that state.