For the second time in two weeks the Australian Securities and Investments Commission has slammed an appliance rental franchise for breaching consumer credit laws by targeting vulnerable people.
Yesterday ASIC banned all the franchise directors of a Victorian-based household goods rental provider, Mobile Rentals, from engaging in credit activities for three-and-a-half years.
The action taken against Mobile Rentals marks the fifth credit business to be hit by ASIC since August.
The directors entered into written undertakings with ASIC after it was found they took “none of the required responsible lending steps when entering into rental agreements”, according to ASIC.
Consumers have also been released from their obligations.
The franchisees were found to have targeted poor and vulnerable consumers. Many of the Mobile Rentals stores were also unlicenced.
The franchisees operated from Geelong, Ballarat, and the Melbourne suburbs of Broadmeadows, Glenroy, Preston, Thomastown, Werribee, Frankston and surrounding areas.
The investigation into the franchisees came about earlier this year, when ASIC cancelled Mobile Rentals’ credit licence and banned its director, Ajay Kaushik, for five years for disregarding responsible lending laws.
After this, ASIC investigated all of the franchisees and discovered they all operated with the “same disregard” for consumer credit laws as the franchisor.
In a statement, ASIC deputy chairman Peter Kell says rogue operators will not be tolerated.
“Whether you are operating in city centres, or targeting consumers in remote indigenous communities, if you are signing up consumers to rental agreements they don’t understand or they can’t afford, ASIC will hold you to account,” Kell says.
When the Commission banned Kaushik, it was revealed many consumers who entered into contracts with Mobile Rentals had been on Centrelink benefits.
Connell Lawyers consumer law expert James Church told SmartCompany credit providers have the responsibility to ask for information about a consumer’s financial position and history.
“The information the consumer must then apply is about their income, and it’s usually similar to going to a bank for a loan. They need to establish how much you can actually afford.”
“They put the information through their processes and determine how much you would be allowed and offer you products which fit within your affordability,” he says.
Last week, ASIC took action against Zaam Rentals’ franchisees for targeting indigenous consumers and not making reasonable inquiries about customers’ financial situations.
Earlier in August ASIC also took action against a number of other rental companies, Channic, Cash Brokers and Ray Rentals, over breaches to consumer credit laws.
Church says for consumer credit laws are complex to understand and some businesses find it challenging to understand and meet their obligations.
“The act is complicated and a lot of people in these instances are getting caught out because they don’t fully understand what the act requires them to do.
“So it’s a combination of not really caring what the act is, and even if they do, it’s often too hard for them to interpret,” he says.