The Federal Court of Australia has ordered a $2 million penalty against Thorn Australia Pty Ltd’s Radio Rentals for contravening its responsible lending obligations.
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,” according to ASIC, Australia’s financial services regulator.
This comes after ASIC investigated Thorn’s leasing practices, particularly whether people signing up to the leases had the capacity to pay.
The breaches relate to more than 270,000 leases signed between January 2012 and May 2015.
Thorn will also have to pay ASIC’s court and investigation costs of $240,000.
Business also has to make $20m in refund payments
In 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”.
This 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.
Radio Rentals is providing refunds for affected customers as part of its enforceable undertaking to ASIC, according to the regulator.
Radio Rentals has until 7 November to contact all customers who are eligible for a refund or write-off.
ASIC deputy chair Peter Kell said the Federal Court’s penalty against Thorn reinforced 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,” he said.