Rent 2 Own Cars Australia: Company breached National Credit Code and ASIC Act
A national network of used car dealerships broke credit laws by charging as much as 97 per cent interest on loans using a dodgy calculator designed by one of its directors.
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A national network of used car dealerships broke credit laws by charging as much as 97 per cent interest on loans, the Federal Court has found.
Rent 2 Own, which at one point had at least 21 franchises across the country and nearly 6000 loan contracts in place, contravened four provisions in the National Credit Code and three in the ASIC Act, the court ruled.
Justice Andrew Greenwood determined that R2O’s directors, Paul Anthony Green and Timothy James Roberts, were “knowingly concerned” in breaches of both the credit code and the ASIC Act.
Mr Green had claimed it “came as a huge surprise” in March 2018 when the Australian Securities and Investments Commission (ASIC) showed him the calculator he had given franchisees didn’t work properly and led to three-quarters of a group of 142 customers paying more than the legal limit of 48 per cent interest.
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In reasons for judgment published on Friday, Justice Greenwood said he did not accept Mr Green’s claim.
“It is notable that Mr Green embarked upon the conduct of the business undertaking of a credit provider, in his capacity as a director of R2O, without making any serious attempt to come to grips with the statutory scheme,” Justice Greenwood said.
“He did not know or have the slightest idea of what ASIC was talking about when it was putting to him, over a considerable period of time in 2016 and especially at the meeting of 9 March 2017, that R2O’s contracts did not comply … with the Code because ‘his’ contracts exceeded the 48% cap.
“They were ‘his’ contracts in the sense that they were based on his calculator,” the judge said.
“Mr Roberts was knowingly concerned because he chose to leave the entire question to Mr Green and Mr Green’s calculators and the method contained within them.”
A penalty is yet to be determined. ASIC wants fined applied. The maximum penalty for a company breaching a key requirement law is $500,000 for each contravention.
ASIC also seeks orders stopping R2O Cars, Mr Roberts and Mr Green from engaging in credit activity.