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20-213MR Court finds used car financier Rent 2 Own Cars Australia acted illegally in providing high cost credit to consumers
The Federal Court of Australia has found that Rent 2 Own Cars Australia Pty Ltd (R2O Cars) failed to comply with the National Consumer Credit Protection Act 2009, including by charging some consumers an interest rate of more than 48% per annum when purchasing used cars.
R2O Cars provided credit for the purchase of used cars to customers including some vulnerable consumers. 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.
On 11 September 2020, the Court declared:
- In 140 contracts, R2O Cars had 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; and
- In 177 contracts R2O Cars had misled consumers by understating the cost of credit and by failing to calculate the interest rate as required by the Credit Act.
ASIC was also successful in obtaining injunctions restraining R2O Cars and the directors, Paul Green and Timothy Roberts from engaging in contraventions of the Credit Act and ASIC Act and engaging in a credit activity for a particular period.
ASIC Commissioner Sean Hughes said, ‘R2O Cars engaged in misconduct by charging excessive interest and by misleading consumers about the true cost of the credit contract. 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 also declared that Paul Green and Timothy Roberts, were involved in some of the company’s conduct which makes them personally liable for civil penalty orders. Mr Roberts did not contest ASIC’s case or defend the proceedings at trial.
In his judgment, Justice Greenwood found that that Mr Green’s conduct represented a person who failed to come to grips with the obligations imposed upon R2O Cars and did so with “eyes tightly closed”, even when he was put on notice by ASIC of concerns about R2O Cars’ compliance with the Credit Code.
The matter will be listed for a further hearing at a later date to determine the amount of the penalty and duration of the injunctions to be imposed on R2O Cars and the two directors.
ASIC commenced the civil penalty proceeding against R2O Cars and the two directors in August 2018 (18-252MR). The trial was heard on 29 and 30 July and 1 August 2019 before His Honour Justice Greenwood.
Moneysmart.gov.au has information and tools to help consumers when buying a car, including on researching car loans and understanding the associated costs including insurance. The website also has information about the fees and charges allowable on loans and what to look for in a credit contract, including how interest is calculated and charged.
On 1 March 2021, the matter was listed for hearing on 12 April 2021 on the question of the appropriate period of restraint and appropriate pecuniary penalty.
Editor's note 2:
On 1 March 2021, the Court made declarations, following the liability judgement on 11 September 2020, that:
- Rent 2 Own Cars Australia Pty Ltd contravened sections 17(4), 17(5), 23(1) and 32A of the National Credit Code and sections 12DA(1), 12DB(1)(a) and 12DB(1)(g) of the ASIC Act.
- Paul Green and Timothy Roberts were each knowingly involved in many of R2O Cars contraventions.
The court also ordered that:
- Rent 2 Own Cars Australia Pty Ltd is restrained from further contraventions of sections 17(4), 17(5), 23(1) and 32A of the National Credit Code and sections 12DA, 12DB(1)(a) and 12DB(1)(g) of the ASIC Act.
- Paul Green and Timothy Roberts are restrained from being knowingly concerned in further contraventions of sections 17(4), 17(5), 23(1) and 32A of the National Credit Code and sections 12DA, 12DB(1)(a) and 12DB(1)(g) of the ASIC Act.
Editor's note 3:
The hearing before Justice Greenwood on the question of the appropriate period of restraint and appropriate pecuniary penalty has been rescheduled to 18 May 2021.
Editor's note 4:
The hearing before Justice Greenwood on the question of the appropriate period of restraint and appropriate pecuniary penalty has been rescheduled to 19 May 2021.
Editor's note 5:
On 19 May 2021, the hearing on the question of the appropriate period of restraint and appropriate pecuniary penalty proceeded before Justice Greenwood in the Federal Court of Australia. His Honour has reserved his decision.