ASIC acts against Zaam Rentals for Infringement of National Credit Laws

On Monday (11 February 2013) the ASIC Media Centre posted a report that it had taken action against Zaam Rentals Pty Ltd (Zaam Rentals) by cancelling its credit licence and banning its two directors from engaging in credit activities for six years and four years respectively.

 

Reason for action

ASIC’s action against the Victorian based household goods rental company arose because it had targeted sales in poorer areas in Mildura and surrounding areas in NSW, including Indigenous communities between 4 December 2010 and 14 September 2011 but had not complied with responsible lending obligations set out in the National Consumer Credit Protection Act 2009 (National Credit Act).

Findings

ASIC’s investigation found that in the relevant period Zaam Rentals did not comply with responsible lending obligations as set out in the National Credit Act. Specifically ASIC found Zaam Rentals:

• did not make reasonable inquires about the requirements and objectives of those entering into the contracts

• did not make reasonable inquiries about their financial situation

• did not take reasonable steps to verify their financial situation

• did not give consumers a credit guide, and

• did not make the necessary disclosures in the rental contract

Comment on findings

ASIC quotes its Commissioner Peter Kell  as saying:

“In deliberately targeting vulnerable people who had limited understanding of the contracts they were signing, and little capacity to meet repayments, Zaam Rentals and its directors have acted unconscionably. . . This behaviour will not be tolerated. The responsible lending provisions are a key element of the national credit laws and ASIC has been and will continue to be very active in monitoring compliance and investigating reports of breaches of the requirements."

Zaam Rentals and its directors can appeal to the AAT the decisions.
 

Background to legislation

The legislative basis for the action is the National Credit Act which requires credit licensees to meet responsible lending conduct obligations in particular the “responsible lending obligation is that credit licensees must not suggest, assist with or provide a credit product that is unsuitable for a consumer” - before suggesting credit the licensee must:

• make reasonable inquiries of the consumer about their requirements and objectives in relation to the credit contract

• take reasonable steps to verify the consumer’s financial situation

• based upon these inquiries, assess whether the credit product is unsuitable for the consumer and only proceed if the credit product is not unsuitable, and

• give the consumer a copy of the assessment if requested

A contract will be unsuitable as in this case if the consumer would be unable to repay it without substantial hardship or it will not meet the consumer’s requirements or objectives. The requirements also apply where the credit limit on an existing contract is being increased.

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