The appliance industry continues to be tainted by the smear of exploitation by rental companies. Australian Securities & Investments Commission (ASIC) senior executive Michael Saadat said a survey of consumer loans, released by ASIC yesterday, would be handed over to a panel reviewing consumer loans and payday lending laws that is to report back to Assistant Treasurer Josh Frydenberg by the end of the year.
This follows a 12 month ban earlier this year on Amazing Rentals, a Darwin business renting whitegoods and furniture to customers it knew could not afford the payments. The company has subsequently closed and its 1,500 customers can keep the goods on ASIC’s order.
ASIC found that the effective interest rate charged to non-Centrepay clients was up to 85%, but for those using Centrepay the already swollen rate ballooned to an average of about 250%— and, in one case, 884%.
Under laws introduced in 2013, payday loans are capped at a maximum rate of 48% a year, but there is no cap on the cost of an appliance rental.
“Consideration should be given to whether the different regulatory treatment for consumer leases vis a vis caps on costs are justified given that payday loans do have caps in place,” Saadat told the media.
“I don’t think we will take a view, though, because as a regulator we don’t necessarily take a position on these policy issues.”
In a scathing comment, the chief executive of the North Australian Aboriginal Justice Agency, Priscilla Collins, said use of Centrepay should be “restricted to companies that are legitimate, that aren’t ripping people off”.
“A lot of the companies that are going to remote communities are so shonky it’s a joke,” she said. “Aboriginal people get targeted over and over.”
Stop Centrepay for consumer loans
Meanwhile, Labor senator Doug Cameron has proposed the government stop the use of Centrepay for consumer loans. He said he became concerned after revelations in March that Radio Rentals, a subsidiary of listed Thorn Group, reaped almost half its revenue — $90m — through Centrepay.
He said Radio Rentals visited him after he raised public concerns about their business.
“They tried to give me the impression they were doing people a favour,” Cameron said.
“I couldn’t care whether they were getting half the revenue through Centrepay or not — they shouldn’t be gouging the most vulnerable people in the community,” he said.
Responding to the government’s argument that his proposal would limit consumer choice, he said his bill doesn’t stop shoppers going to “radio rentals or any other rip-off merchant and getting a consumer loan”.
Complaints about Flexirent
Meanwhile ASIC has received complaints of high fees charged by another player in the sector, Flexirent, which provides leasing to customers of retailers including Harvey Norman, although it does not use the Centrepay system.
Saadat said ASIC now had several investigations into consumer leasing, which has been under the regulator’s microscope since 2013.