Almost everyone is aware of the retail giant, Radio Rentals. Well, it turns out this famous company became infamous when a penalty of $2 million was imposed on it, and the management was asked to return $20 million to its overcharged customers. The company has agreed to abide by the penalty.
Thorn Group Limited, the company that runs Radio Rentals, was accused of breaking national consumer laws. Thus, after an extensive investigation done by the Australian Securities and Investment Commission (ASIC) into the company's doubtful lending practices, a fine was imposed on the company. Radio Rentals was found guilty of making people sign lease contracts without ensuring if they were financially capable of paying the lease.
Radio Rentals has agreed to write off or refund default fees worth $6.1 million and return unwarranted lease payments worth $13.8 million.
What Lesson Is There for Other Rental Companies
Radio Rental has been charged with a heavy fine because it breached the laws and entered into more than 270,000 lease agreements from January 2012 to May 2015. According to Peter Kell, the acting chairman of ASIC, the customers with whom the company made agreements were vulnerable people who were going through financial crisis.
From a consumer's perspective, appliance rental companies like Renta Centre, are likely to benefit from this case as customers look for a company that ensures rigorous compliance with the local laws and lending obligations. Companies like this deal with their customers on fair terms instead of taking advantage of their financial condition.
Other equipment, furniture, and home appliances rental companies now need to prove their worth and honesty while dealing with customers because people have now become aware of what Radio Rentals was doing. They have realized that it's better to buy goods at cheap rates instead of continuing to pay periodic rental payments. People have become conscious now that other rental companies might also be charging them much more than a product is worth.
What Has Radio Rentals Been Advised to Do?
Radio Rentals has been advised to start using simpler English in its contracts and to work closely with ASIC in order to communicate with those customers whose leases are either about to end or have already ended. According to the statement issued by Thorn Group Limited, the company seems to have revised their policies and has made significant changes in their leasing operations.
According to the representatives of the company, the changes made by Radio Rentals in its policies will now put customers at the forefront of their business ideology. The company has further confirmed that it will meet the necessary lending obligations and will continue to fulfil the needs of its customers.
Consumer leasing is an integral part of the Australian financial system as a study shows that more than 3 million Australians are not included in the financial mainstream of the country. Owing to the ASIC investigation and the penalty, Radio Rental's business has been affected seriously. As a result, the company declared a loss of $9.67 million in its half-year financials.