ASIC litigation against fictitious high-cost ‘leases’ protects against exploitation

Consumer Action has welcomed the Australian Securities and Investment Commission’s (ASIC) announcement that it has sued Rent4Keeps and Layaway Depot for breaches of the National Credit Code involving high cost ‘lease’ arrangements.

“We regularly hear from people who have been signed up to excessively expensive and misleading ‘consumer lease’ arrangements that require them to pay many times more than the value of the goods. Some are even designed so fees continue indefinitely”, said Gerard Brody, CEO Consumer Action Law Centre.

Consumer Action has previously taken legal action against Rent4Keeps and supports the action  ASIC is taking.

ASIC alleges that the companies entered numerous arrangements fictitiously structured to avoid key consumer protections in the National Credit Code, including a 48% per annum cost cap limit that applies to credit contracts.

Despite the name of their company suggesting otherwise, consumers are not actually entitled to keep products obtained from Rent4Keeps franchises at the end of a ‘lease’ contract. Instead, the contracts include a term that allow Rent4Keeps to gift the products to someone else. ASIC alleges that this contractual term is a device that avoids characterising the contracts as a credit contract, thereby avoiding the 48% annual cost cap.

“Consumer leases are a fictitious lending model designed to avoid important consumer protections that apply to other credit products,” said Mr Brody.

ASIC’s litigation underscores the pressing need for a 48% per annum cost cap to be introduced to apply to consumer leases, a change the Coalition Government committed to introduce in 2016, following recommendations by an independent review of small amount credit contract laws.

“The government has known about the problems with the consumer lease industry for over six years, yet has failed to act upon the solution it accepted from its own expert review of these laws back in 2016. A failure to introduce the recommended cost cap for consumer leases has allowed businesses like Rent4Keeps to charge excessive fees to people at risk of financial hardship,” said Mr Brody.

The harm caused by consumer leases can also be amplified when payment for these arrangements are debited via Centrepay, a system that allows the debtor to take funds from a person’s Centrelink payment before it even hits their bank account.

“It is inexplicable that consumer lease providers can access payments through the Centrepay system, when these credit contracts can (and often are) the most expensive form of regulated credit available in Australia. We call upon the government to urgently fix this issue as and remove consumer lease providers’ access to Centrepay.”

Read here about previously legal action Consumer Action has taken against Rent4Keeps:



Media Contact:

  • Mark Pearce, Media and Communications Advisor
  • Tel: 0413 299 567
Print Friendly, PDF & Email

Skip to content