The Federal Court has fined Rent4Keeps $4 million. It has fined its largest franchisee, Darranda Pty Ltd, $3.4 million. The court found they overcharged consumers for essential household goods. It also found they failed to meet obligations as credit licensees.
Deputy Chair Sarah Court said, ‘The penalty reflects the seriousness of this conduct as it involved vulnerable people, many with a poor credit rating who were purchasing essential items such as fridges, washing machines and mobile phones at unlawfully inflated prices.’
‘These customers were denied the protections afforded by the Credit Act and typically, they paid almost four times the retail cost price of these essential items.’
After a nine-day trial in September 2024, Justice Hespe found Darranda entered 516 agreements it called ‘leases’. The court held they were credit contracts. That meant Darranda breached the 48 per cent annual rate cap. It also failed to disclose key contract details. That included the interest rate and the cash price of the goods.
The court found Darranda failed to act efficiently, honestly and fairly in credit activities. It found Rent4Keeps was knowingly involved in Darranda’s breaches. That covered the rate cap and general obligations.
In her reasons, Justice Hespe said that, ‘Darranda was dealing with a financially vulnerable customer base. The statutory safeguards, including the key requirements, are there to protect the interests of those consumers in particular. The standards set by the legislation were breached. It is not appropriate for a commercial operator servicing a vulnerable class of consumers to breach statutory safeguards without consequence.’
Her Honour also noted that, ‘The message must be conveyed that operators conducting a business for profit in a highly regulated industry with a financially vulnerable client base must do so to a standard that is efficient, honest and fair. The message is also directed to the individuals who controlled Darranda and Rent4Keeps (Aust) and who continue to control entities operating in the highly regulated consumer credit environment.’
Darranda was the Victorian ‘State Master’ for about 12 Rent4Keeps franchisees. It operated in Victoria and South Australia. Rent4Keeps ran a franchise system supplying goods by instalments to people on low incomes and Centrelink recipients.
Section 9 of the National Credit Code treats goods leases with a right or obligation to purchase as sales by instalments. They are deemed credit contracts. Section 32A bans lenders from entering a credit contract with an annual cost rate above 48 per cent. That cap did not cover consumer leases at the time of Darranda’s conduct. The law has since changed so the cap also applies to lease arrangements.
Examples before the court included:
– A 10kg washing machine with a cash price of $795 sold for $4,316 over two years. The excess charged was $3,074.22 above the cap.
– A 400L fridge with a cash price of $798 sold for $4,784 over two years. The excess charged was $3,537.54.
– A mobile phone with a cash price of $1,229 sold for $5,980 over two years. The excess charged was $4,060.32.
– A 65 inch television with a cash price of $884 sold for $4,836 over two years. The excess charged was $3,455.21.
Rent4Keeps is no longer offering goods to consumers. An entity trading as R4K has been offering similar goods by instalment contracts since 1 July 2023. Kevin Payne, a director of Rent4Keeps, is also a director of R4K. He is the ultimate owner of R4K. His wife, Vicki Payne, is the ultimate owner of Rent4Keeps.
