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Mr Rental ordered to refund $300,000 for unfair contract term

Michelle Hammond /

Household goods rental franchise Mr Rental says it has taken “the necessary steps” to satisfy the corporate regulator, which has ordered it to refund more than 1,500 customers because of an unfair contract term.

 

Mr Rental Australia, which opened its first store in 1991, has entered into an enforceable undertaking with the Australian Securities and Investments Commission.

 

An ASIC investigation into Mr Rental’s standard form rental agreement led to concerns about the inclusion of a “calculation period adjustment”.

 

This allowed Mr Rental to charge an additional fee to consumers who terminated their rental agreements early.

 

It was found to be an unfair contract term under the Australian Securities and Investments Commission Act 2001 (the ASIC Act) and the Australian Consumer Law.

 

The enforceable undertaking will see Mr Rental provide refunds to approximately 1,560 consumers, and amend the standard form rental contract used by the 52 franchisees operating under the Mr Rental banner.

 

The refunds are anticipated to be in excess of $300,000.

 

According to Mr Rental managing director James Nixon-Smith, the company was of the view that its rental agreements were compliant with the various codes.

 

“But this was not the same interpretation as ASIC,” Nixon-Smith said in a statement.

 

Nixon-Smith said Mr Rental “worked constructively” with ASIC to understand its position and, following considerable consultation, reached an agreement with ASIC.

 

“Mr Rental agreed to remove the calculation period adjustment, refund customers that originally paid this and inform all customers of the changes,” he said.

 

“The calculation period adjustment is no longer part of our agreements and we have updated all of our documentation to reflect this change.

 

“Mr Rental and/or its franchisees will also apply for and obtain an Australian Credit Licence. This will enable Mr Rental more flexibility in its business model.”

 

Nixon-Smith said less than 5% of Mr Rental’s customers were affected by the situation.

 

“The company has taken the necessary steps to ensure all parties are satisfied with the outcome and ASIC has acknowledged our willingness to cooperate,” he said.

 

As part of its undertaking to ASIC, Mr Rental will:

  • Write to those customers who paid a calculation period adjustment and provide them with a refund of the amount paid.
  • Advise existing customers that it will not charge a calculation period adjustment in the event they terminate their agreements early.
  • Not enter into any further rental agreements which allow it to charge a calculation period adjustment upon early termination.

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