ASIC has announced that it has lodged civil penalty proceedings in the Federal Court of Australia against Thorn Australia Pty Ltd in relation to four contraventions by Radio Rentals of section 153 of the National Credit Act in respect of each of the 278,683 household appliance consumer leases which it entered into in the period from 1 January 2012 to 1 May 2015.

ASIC alleges that Thorn failed to make reasonable inquiries about each consumer’s financial situation, specifically as to each consumer’s actual housing costs, and to verify actual expenses, before making an assessment as to the unsuitability of each lease and that such failure meant it had not made a proper assessment of suitability of the leases for consumers.

ASIC says that it and Thorn will file a Statement of Agreed Facts in the Federal Court in which Thorn will admit the contraventions, and will make joint submissions that the appropriate penalty to be paid by Thorn is $2 million. The penalty amount payable by Thorn will be determined by the Court. ASIC is also claiming costs of $200,000. The first hearing will be on 20 February 2018.

In addition, ASIC has accepted an Enforceable Undertaking (EU) from Thorn, to address ASIC’s responsible lending concerns and to address concerns about Radio Rentals inadvertently accepting and retaining excess payments from customers that were more than the lease required. Radio Rentals has already returned approximately $11.8 million of the $13.8 million to customers who overpaid.

Under the terms of the EU, Radio Rentals will also:

• refund or write-off approximately $6.1 million in default fees and charges relating to an estimated 60,000 leases as a result of the responsible lending conduct which is the subject of the civil penalty proceedings.
• hold the balance of both the responsible lending refunds and the overpayment refunds that cannot be returned to customers in trust and ultimately donate it as a community benefit payment if the money is not claimed.
• appoint an independent expert to review its compliance with obligations under its Australian credit licence (including general conduct and responsible lending obligations) and oversee the refund program.

In addition, in response to ASIC’s concerns about Radio Rentals’ contracts containing terms that may have led to poor outcomes for consumers, Radio Rentals will:

• roll out a new plain English lease contract by 1 June 2018; and
•  work with ASIC to improve communications with customers whose leases are ending or have ended, about exercising their end of lease options.