Finance Supplier To Harvey Norman, IKEA & Apple Resellers Slammed
Scrutiny of FlexiGroup who describe themselves as a key supplier of financial services to retailers Harvey Norman, IKEA, and Apple Resellers have been accused of taking advantage of vulnerable customers looking to finance consumer electronics and appliance goods.
Also coming in for attention is Thorn, which owns Radio Rentals. Both the Australian Securities and Investments Commission and the Federal Senate have probed the actions of these businesses. Currently Thorn, is operating under an ASIC enforceable undertaking and facing a class action lawsuit after it was forced to refund $6.1 million in default fees and $13.8 million to customers who made excessive lease payments.
As a result, Thorn shares have taken a battering over the past three years.
Both FlexiGroup and Thorn have long histories providing finance to customers at the point of sale with both organisations accused of questionable practises which appear to have been accepted by the retailers introducing their services.
Rebecca James, the recently appointed CEO of FlexiGroup told a Senate hearing in Brisbane yesterday “We recognise that the industry and the company face unprecedented regulatory scrutiny over the coming months and years.”
The comments came after financial counsellors provided evidence to the Senate’s economics references committee that customers on low incomes have been taking out loans for essential household items on relatively high interest rates they cannot afford.
Thorn CEO Tim Luce said that he and CFO Peter Forsberg represent “a significant departure from the historical business practices of Radio Rentals” and support more regulation of the consumer leasing industry.
“Radio Rentals is navigating a challenging period in its history, resulting in wholesale changes to policies, practices and procedures. We would like to see the broader industry follow suit,” he said.
According to the Financial Review both Thorn and FlexiGroup said they have voluntarily adopted reforms proposed by the government legislation relating to “small amount credit contracts”, which have not yet been introduced. But they said they have not had any contact with the government about the bill in the past six months.
FlexiGroup was questioned about whether sales staff in the retailers offering its leasing product were paid sales-based incentives. CEO Rebecca James said they are, but this is “significantly less than what they were previously”, and the company has increased training programs to ensure its products aren’t being offered to vulnerable customers.