RADIO Rentals’ parent company has agreed to pay $25 million to settle a class action over allegations it misled customers when it told them they could buy items post-lease for $1.
Thorn Group has not admitted liability but says it will pay $25 million and that its insurer will also make a contribution to the settlement, which will end the insurer’s obligations in regard to any related claims.
Law firm Maurice Blackburn launched the class action in 2017 on behalf of Radio Rentals customer Casey Simpson, alleging that about 200,000 people paid excessive amounts on “Rent Try $1 Buy” leases because they were not automatically entitled to buy the items for $1 as suggested.
The class action had been estimated at being worth $50 million and shares in Thorn surged as much as 12.8 per cent to 26.5 cents when the market opened.
They were still at that level at 1045 AEST, albeit 91.7 per cent down on their December 2014 high of $3.20.
Maurice Blackburn said that, while advertising suggested customers could buy rented appliances or furniture for $1 at end of lease, contract fine print stated that customers could negotiate a price with Radio Rentals.
If customers failed to secure a purchase, contracts automatically rolled over into another term.
Ms Simpson, a Wagga Wagga mother of five, said in 2017 she had paid Radio Rentals $3,320 for a used bed worth $480 and she still didn’t own it.
Instead of letting her buy the used bed for $1 when her 18-month contract ended, the appliance rental giant allegedly continued to deduct weekly payments from her Centrelink account.
Thorn Group also last year paid $6.1 million in remediation and a $2 million civil penalty after an Australian Securities and Investments Commission investigation found Thorn lending to customers who did not meet minimum income thresholds for their contracts.