Layaway Depot Pty Ltd, which allows consumers to purchase electronic goods via payment instalments, has been penalised $375,000 for providing high-cost credit and engaging in unlicensed credit activity.
The Federal Court has found that Layaway charged excessive interest rates on 70 loans taken out by consumers to buy electronic goods including mobile phones, televisions and speakers.
In one example, customers paid instalments which totalled $780 for a Bluetooth speaker which retailed for $200, and $1,200 for a mobile phone which retailed for just $249.
ASIC deputy chair Sarah Court (pictured above) said for a consumer to pay almost five times the market price for a mobile phone was “excessive”.
“For most of the consumers, their sole income was Centrelink benefits,” Court said. “ASIC will continue to take action where we see consumer harm in the provision of credit, especially where financially vulnerable consumers are involved.”
The Federal Court found Layaway engaged in unlicensed credit activity and charged consumers in excess of the annual cost rate of more than 48% in respect of 70 payment arrangements. It also ordered an injunction, permanently restraining Layaway from engaging in a credit activity and entering into credit contracts with an annual cost rate that exceeds 48%.
Court said that ASIC took on the case because it believed Layaway contracts were deliberately structured to get around consumer protections that exist under the Credit Act.
“These protections, such as the maximum rate of annual cost that can be charged, are in place to ensure credit is provided to consumers fairly, and people are not being taken advantage of,” she said.
ASIC said that Section 9 of the National Credit Code provided that goods leases with a right or obligation to purchase were to be regarded as sales of goods by instalments, and were deemed to be credit contracts.
The Code contains a prohibition on lenders entering into a credit contract where the annual cost rate exceeds 48%, taking into account fees and charges and the timing of repayments.
ASIC added that, as a result of amendments to the consumer credit legislation introduced by the Financial Sector Reform Act 2022 from June 12, 2023, a range of new protections would apply for consumers who take out small amount credit contracts (SACCs) and consumer leases.
These include a cap on the cost of consumer leases, a cap on the percentage of a consumer’s income that can be used to meet SACC or consumer lease repayments, and anti-avoidance provisions designed to disincentivise SACC and consumer lease avoidance practices.
