In the same week that the Federal Government has released draft legislation to reform payday loans and consumer leases, Consumer Action Law Centre (Consumer Action) has announced proceedings in the Federal Circuit Court against Darranda Pty Ltd (trading as Rent4Keeps) on behalf of two separate clients.
Consumer Action alleges that Rent4Keeps breached the National Consumer Credit Protection Act 2009 when leasing household items to two people experiencing extreme vulnerabilities; including that the lease contracts resulted in substantial financial hardship; and that Rent4Keeps engaged in unfair tactics to procure the two clients as customers. The claim alleges that the lease contracts for both clients were signed in their home.
One of the clients, Davinia Convery*, entered into five consumer lease contracts with Rent4Keeps to hire goods between January 2013 and September 2016. These would have required Ms Convery, a single mother of four on an extremely low income, to repay a minimum of $11,619.40. The prices for these contracts, expressed as an interest rate, was between 217% and 503%. The repayments for one tablet were over 6 times the recommended retail price.
Between March 2014 and September 2016, Rent4Keeps repeatedly sent Ms Convery SMS messages encouraging her to lease additional goods, even though Rent4Keeps knew, or should have known, that she could not afford to pay for the leased goods.
Much of this alleged detriment will be less likely to occur under new draft legislation released by Minister Michael McCormack this week. The National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2017 introduces, for the first time, a cap on the cost of a consumer lease at 4% of the equivalent retail price every month for a maximum of 48 months.
Australians’ incomes will also be protected, as only 10% of net income can be used to pay off consumer lease contracts, leaving more money for the essentials in life often compromised by exorbitant consumer lease contracts. The bill also prohibits consumer lease providers from door-to-door selling.
This 10% protected earnings amount will also apply to payday loans (reduced from the current 20%), while penalties for non-compliance have been enhanced.
Quotes attributable to Gerard Brody, CEO, Consumer Action Law Centre:
“Rent4Keeps preyed on these two low income earners, encouraging them into take on contracts that they couldn’t afford, and left them struggling to make ends meet”
“We are taking this court action to enforce the law, and expose the harm these businesses do.”
“Consumer Action congratulates the Federal Government on releasing this much needed draft legislation to make payday loans and consumer leases less risky. These vital reforms will improve the lives of our clients and thousands of other people struggling to make ends meet. We look forward to the Bill being introduced into Parliament.”