Radio Rentals Slammed Facing $1M Payout
The Company’s that rents goods at 250% over the purchase price has been forced to update how it checks its customers’ ability to pay for rentals.
The Company whose share price has fallen by 24 per cent since December 31 when it was at $3.11 has been under scrutiny for some time by ASIC which continues to question its compliance with responsible lending obligations.
Thorn managing director, James Marshall, has rejected the claims of a former Thorn finance team employee who told Fairfax Media sales at the company had declined by 30 per cent since the update in April to the poverty index figures it uses to determine customers’ ability to make repayments.
Mr Marshall told Fairfax Media it is true Thorn does not update its figures every quarter because the changes are often minor but there had been a longer “period” until April when the figures were out of date for the Henderson Poverty Index that it uses.
He said Thorn’s repayment rates amounted to about 2.6 times the cost price of the product, or 250 per cent.
The HPI has been compiled by the Melbourne Institute since 1973 and is updated every quarter. As of March 2015, the poverty line was calculated at $958 a week for a couple, one of which is working, with two dependent children. The poverty line in March 2011 was about $874.
Following ongoing discussions with ASIC since April, the Company is now moving to use other measures to assess creditworthiness, including assessing people’s cost of living based on where they live.
Mr Marshall admitted to claims it has been overpaid between $700,000 and $1 million by customers on the dole via a government direct debit system called CentrePay because customers neglect to stop repayments when the lease is paid in full. CentrePay allows people on CentreLink to set up direct payments for essential items like electricity and education.
Mr Marshall put this down to errors in legacy IT systems and said the company is now working on returning the money to customers. He said the amount would not have a significant effect on its 2016 earnings.
A Credit Suisse report published in March estimated half of Thorn’s revenue comes from CentrePay. Mr Marshall has said this is inaccurate but Credit Suisse stands by its analysis.