Financier found to have illegally provided high cost credit to consumers

by Madison Utley15 Sep 2020

The Federal Court of Australia has found a used car financier acted illegally in providing high cost credit to consumers, charging some customers an interest rate of up to 77% per annum.

Rent 2 Own Cars Australia (R2O Cars) failed to comply with the National Consumer Credit Protection Act 2009 and was found to have taken advantage of vulnerable consumers in the process.  

The court action covered 142 hire-to-purchase contracts entered into between 1 March and 6 September 2017 and 90 hire-to-purchase contracts entered into between 25 May and 18 June 2018.

“R2O Cars engaged in misconduct by charging excessive interest and by misleading consumers about the true cost of the credit contract,” said ASIC Commissioner Sean Hughes.

“ASIC considers it is important we act to deter this type of misconduct through Court action as well as protect consumers from predatory behaviour.”

The Court determined R2O Cars breached the price cap in the Credit Act by charging consumers an interest rate of more than 48% per annum, and in some instances up to 77% per annum, in 140 contracts.

In 177 of the contracts, R2O Cars misled consumers by understating the cost of credit and by failing to calculate the interest rate as required by the Credit Act.

ASIC has successfully obtained injunctions restraining R2O Cars directors Paul Green and Timothy Roberts from engaging in credit activity for a period of time.

Because the Court found Green and Roberts were involved in the company’s misconduct, they are personally liable for civil penalty orders.

While communicating the Court’s judgment, Justice Greenwood said Green had failed to comprehend the obligations imposed upon R2O Cars by the Credit Act and acted with “eyes tightly closed”, even after being put on notice by ASIC following concerns about R2O Cars’ compliance with the Credit Code. 

The matter will be listed for a further hearing to determine the amount of the penalty and duration of the injunctions imposed on R2O Cars and the two directors.