Class action against Radio Rentals leads to $29 million settlement

Class action against Radio Rentals leads to $29 million settlement

Radio Rentals' controversial 'Rent, Buy, $1 Buy' scheme has come back to bite more than two years after a class action filed by Maurice Blackburn Lawyers alleging unconscionable conduct. 

The electronics and home appliance rental group's parent company Thorn Group (ASX: TGA) has stopped short of admitting guilt over the issue, but yesterday announced it had settled the class action for $25 million.

Thorn noted its insurer would also make a separate contribution towards the settlement, which based on Maurice Blackburn's indications would be worth an extra $4 million.

The law firm claims more than 200,000 customers who entered into a lease with Radio Rentals in any state except South Australia between 28 March 2011 and 29 March 2017 may be eligible to receive a refund. 

The settlement, which still needs to be approved by the Federal Court, stems from a class action commenced by Maurice Blackburn's client Casey Simpson alleging Radio Rentals engaged in misleading or deceptive conduct and that its contracts contained unfair contract terms.

The claim alleged the company continued to charge customers well beyond the retail value of the goods -  including via Centrepay deductions - with the consumer never getting ownership of the goods.

Rebecca Gilsenan, principal lawyer at Maurice Blackburn Lawyers, says the case was brought to achieve three primary goals -  highlight the problem, hold the company to account, and compensate consumers who had been ripped off.

"This was a very difficult case to run, and a difficult case to win, but it was important that this case be brought to illuminate what goes on too often with businesses that deal with vulnerable Australians," Gilsenan said.

"The case also highlights the importance of having a properly functioning class action regime because, without one, there is no way that vulnerable Australian consumers who were victims of exploitative lending activity would be able to take action to stop it occurring and recover some compensation.

"That is the stark reality in a situation like this. Without this action, the company would remain unaccountable, bad practices would not be forced to change, vulnerable consumers would continue to get trapped in debt and they would have no chance of recovering a single dollar or achieve any measure of justice."

Thorn Group noted it had been considering its future funding requirements as part of strategic review, and was confident it would be able to meet its share of the settlement amount.

The company has also responded to speculation in the AFR that it was believed to be considering a recapitalisation backed by shareholder Duncan Saville instead of an $82 million takeover bid from Consolidated Operations Group.

"At the Company's Annual General Meeting on Friday 30 August 2019 three new directors were elected to the Board and one current director retired," Thorn said.

"The Company considered that it would be appropriate, and consistent with good corporate governance, for the newly reconstituted Board to have the opportunity of considering the range of options available to the Company under the strategic review.

"As no decisions have been made, the Company is unable to comment further at this stage."

TGA shares closed 25.5 per cent higher today at $0.30 each, but this is still well below the $0.57 a share mark where they were trading at the beginning of 2019. 

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