ASIC is suing Rent4Keeps and Layaway Depot in separate proceedings for alleged breaches of various consumer protections under the Credit Act. ASIC is concerned that both businesses operate business models designed to avoid consumer protections for financially vulnerable consumers, including the annual cost rate cap under the Credit Act.

The effect of this is that Rent4Keeps and Layaway Depot customers, who are often on low incomes or Centrelink benefits, are paying significantly more for electronics and whitegoods than they lawfully should. For example, one consumer used Centrelink payments to pay almost $2,500 for a fridge which retailed at $365, another paid $1,200 for a mobile phone which retailed for just $249.

ASIC Deputy Chair Sarah Court said ‘ASIC has been reviewing the conduct of companies offering financial products to vulnerable consumers to ensure consumer protections are in place. In both these cases, consumers have paid well above the market price for consumer goods that are part of everyday life, such as mobile phones and whitegoods.’

In both proceedings, ASIC alleges that the arrangements were credit contracts regulated by the Credit Act and that both Darranda (a franchisee of Rent4Keeps) and Layaway Depot failed to comply with the consumer protection obligations in the Credit Act. In particular, the amounts charged by both Darranda and Layaway Depot exceeded the 48 per cent annual cost rate cap that applies to credit contracts under the Credit Act.

‘These appear to be arrangements deliberately structured to get around the law by avoiding consumer protections, such as the 48 per cent cap, to charge consumers significant amounts,’ concluded Ms Court.

Rent4Keeps and Darranda: ASIC alleges that Darranda, in a three-month period, entered into 533 agreements it called ‘leases.’ ASIC alleges these agreements were credit contracts put together to avoid the consumer protections, including a rate cap, that should apply. By avoiding the rate cap, Darranda customers were charged more than three times the amount that could lawfully be charged, and some customers were charged more than six times the retail value of the goods.

ASIC further alleges that the attempt to avoid the provisions of the Credit Act also enabled Darranda and Rent4Keeps to avoid the obligation to disclose the cash price of the goods, how interest would be calculated, how frequently interest was to be paid and the total interest payable.

Layaway Depot: ASIC alleges Layaway Depot, over a 14-month period, entered into 70 deferred payment agreements which were structured to avoid the consumer protections that apply to credit contracts, including the 48 per cent annual cost rate cap. For example, some customers paid $780 for a Bluetooth speaker which retailed for $200 or $1,200 for a mobile phone which retailed for just $249.

ASIC also alleges that Layaway Depot was engaged in unlicensed credit activity in contravention of the Credit Act.

ASIC is seeking pecuniary penalties, declarations, injunctions and other orders against Rent4Keeps, Darranda and Layaway Depot.

The Rent4Keeps and Darranda matters have been filed separately to the Layaway Depot matter. Both matters are yet to be listed by the Court.

Download

• Rent4Keeps Originating application (PDF 443 KB)
• Rent4Keeps Concise statement (PDF 472 KB)
• Layaway Depot Originating application (PDF 352 KB)
• Layaway Depot Concise statement (PDF 542 KB)

Background

Rent4Keeps Pty Ltd and its franchisees, including Darranda Pty Ltd, market essential goods such as fridges, washing machines and mobile phones to people on low incomes or who receive Centrelink benefits.

Layaway Depot markets consumer electronics such as mobile phones and tablets to financially vulnerable consumers who may not have access to mainstream credit.

Section 9 of the National Credit Code (which is Schedule 1 to the National Consumer Credit Protection Act 2009) provides that goods leases with a right or obligation to purchase are to be regarded as sales of goods by instalments, which are deemed by the Code to be credit contracts.

Darranda is the Victorian ‘State Master’ of around 12 Rent4Keeps franchisees. It operates in both Victoria and South Australia. Layaway Depot offered consumer goods via their website.

The National Credit Code contains a prohibition in section 32A on lenders entering into a credit contract where the annual cost rate exceeds 48 per cent. The cost rate is determined by a formula that takes into account fees and charges and the timing of repayments.

ASIC’s Moneysmart has further information on consumer leases, rent to buy and how it works.

Rent4Keeps and Darranda Editor's note:

On 13 May 2022, the first case management hearing for Rent4Keeps was held before Justice Beach. The matter is next before the Court for a further case management hearing on 26 August 2022. 

On 10 June 2022, ASIC filed a statement of claim pursuant to the order of Justice Beach of 13 May 2022. Download the statement of claim (PDF 720 KB).

Layaway Depot Editor's note:

In June 2023, the Federal Court ordered Layaway Depot Pty Ltd pay a penalty of $375,000 for breaches of the Credit Act (23-139MR).

Rent4Keeps Editor's note:

The case management hearing listed for 18 August 2023 before Justice Hespe has been vacated.

The matter has been listed for trial at 10.15am on 5 February 2024.

Rent4Keeps Editor's note:

The trial was held before her Honour Justice Hespe in the Federal Court in Melbourne from 5 to 14 February 2024. Closing submissions will be heard on 18 March 2024.

Rent4Keeps Editor's note:

Closing submissions were heard before Justice Hespe in the Federal Court in Melbourne on 18 March 2024. Her Honour has reserved her judgment.