Queensland rental company Amazing Rentals has agreed to close its Darwin operations for 12 months, refund customers and fork out $10,000 in donations after the corporate watchdog raised concerns about its compliance with responsible lending obligations and its potential targeting of vulnerable consumers.
Amazing Rentals, which rents whitegoods and furniture in Darwin and Toowoomba and Caboolture in Queensland, last week entered into an enforceable undertaking with the Australian Securities and Investments Commission.
It is the latest move by the regulator to crack down on rental companies that breach lending obligations, with ASIC having taken action against six other rental agencies in the last two years.
An investigation by the regulator found the majority of Amazing Rentals’ Darwin customers received government benefits as their only source of income, including many indigenous Australians who lived in regional or remote areas and had limited access or exposure to other retail or credit services.
Some consumers did not speak English as their first language, could not read or understand the contracts they signed up to, and did not understand they were entering into a rental contract rather than a contract to purchase the goods.
ASIC was concerned this conduct was potentially unconscionable and did not comply with general conduct and record-keeping obligations under the National Credit Act.
The rental company has agreed to close operations in Darwin for 12 months, terminate all consumer leases entered into at the Darwin store between October 8, 2011, and May 26, 2015, cancel any payment arrangements in relation to those affected consumers and transfer ownership of the goods to them.
Amazing Rentals will also refund to 34 consumers all credit charges – the difference between retail and lease costs – and make $10,000 in donations to the North Australian Aboriginal Justice Agency and the Top End Women’s Legal Service.
In addition, the enforceable undertaking requires Amazing Rentals to engage with an independent external compliance expert, who will report to ASIC and make any recommendations about required changes.
Rohan Harris, principal at law firm Russell Kennedy, told SmartCompanyt that responsible lending obligations require the lender, in a consumer context, to assess the borrower’s financial situation and their capacity to understand and perform the contract.
“I think they’ve obviously targeted people in a particular group that you would have to say are in a position of potential disadvantage and do not really understand what they are agreeing to,” Harris says.
“In those situations, your responsibilities really come to the fore, you really have to make an assessment of the consumer’s position,” he continues.
“The regulations almost assume the consumer in that situation is in a position of commercial disadvantage, so there’s an added onus on the lender to meet additional tests for borrowing.”
Harris says ASIC has had rental companies in its crosshairs since the introduction of the National Consumer Credit Protection Act 2009.
“These obligations were thought of with this very conduct in mind,” he says.
“This sort of conduct gives ASIC an obvious target.”
SmartCompany contacted Amazing Rentals but did not receive a response prior to publication.