Comment by Claire Reilly
The appliance and electronics rental industry could soon face increased scrutiny, with two Australian rental companies facing the regulatory might of the Australian Securities and Investments Commission for unreasonable rental practises.
Last week, the rental provider Mr Rental confirmed it had entered into an enforceable undertaking with ASIC to repay customers who were incorrectly charged fees for breaking an early termination clause in their contracts — a condition that the regulator deemed “unfair”.
Mr Rental will be required to repay approximately 1,560 customers, with the final bill expected to exceed $300,000, and to advise existing and prospective customers that they will not be charged this fee for "calculation period adjustment" as it was known.
Today, just one week after news about Mr Rental’s stoush with ASIC, a second provider has come under the full force of the Securities and Investments Commission. Mobile Rentals — a Victorian business with six operating locations across the state and a range of appliances and electronics available for rent — has had its credit license revoked, while director Ajay Kaushik has been banned from engaging in credit services for five years.
ASIC ruled that Mobile Rentals had not kept adequate records, had failed to provide its customers with a credit guide or make the “necessary disclosures” in its rental contracts, and had not made “reasonable enquiries” about its customers’ financial situations and requirements.
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In his indictment of Mobile Rentals, ASIC commissioner Peter Kell said that the provider would be required to maintain a dispute resolution service for another 12 months to assist affected customers, many of whom “were on Centrelink benefits”.
On Mobile Rentals’ website, the company stipulates that rental payments can be paid with Centrepay (a service that allows Centrelink customers to set up a direct debit to pay for necessary bills) and that customers do not need to be employed to rent products from the company.
The flexibility to pay with Centrepay is certainly helpful for many Australians on Centrelink payments who may not be able to afford the high outlay on expensive whitegoods or computers. Indeed, this is a feature that is also offered by other rental providers such as Radio Rentals.
However, the fact that customers are able to enter a contract without employment does raise questions about their continued ability to meet contract terms and repayment requirements.
Harvey Norman’s FlexiRent service and JB Hi-Fi’s RentSmart service require proof of employment (in the case of Harveys) or a minimum salary of $30,000 (in the case of JB) in order to qualify for rentals. Radio Rentals stipulates that, although consumers do not need to be employed to rent, they must provide residential, landlord or real estate details and pass a credit check to begin a contract.
While appliance rental is an attractive way for consumers on low-incomes to access household essentials, the fact that ASIC is cracking down on malfeasant rental providers indicates the industry is not without shonky operators. There is also a risk that, as ASIC increases its scrutiny of the industry, reputable renters and credit providers may be drawn into the regulatory quagmire and get tarred with the same brush as those providers who are not compliant with the National Consumer Credit Protection Act.
ASIC commissioner Peter Kell said today that the regulator “has been, and will continue to be, very active in monitoring compliance and investigating reports of breaches”.
For the sake of rental providers and consumers alike, let us hope that those who fail to meet the legal standards are called out for their malpractice. The reputation of the retail industry relies on it.
To view the full National Consumer Credit Protection Act (2009), click here.