ASIC asked to investigate Radio Rentals and its ‘rent try $1 buy’ offer

The Consumer Action Law Centre has welcomed the release of the Australian Securities & Investments Commission’s (ASIC) updated Good Practice Guidance for Credit and Financial Service Advertising and hasn’t wasted any time in lodging a complaint about Radio Rentals’ advertising. The Centre believes Radio Rentals and its trademarked ‘rent try $1 buy’ slogan may mislead consumers about the nature of its contracts and may lead consumers to believe they can purchase the leased products at the end of the contract term—when in fact they have the option of buying a ‘similar’ product.

‘We believe many Australians would hear Radio Rentals’ “rent try $1 buy” adverts and reasonably think that customers can buy the goods for $1 at the end of a lease contract—but the reality is the fine print says they have the option of buying a similar product. We think, in this situation, the headline and the fine print tell two different stories and we’ve asked ASIC to investigate,’ said Gerard Brody, Director of Policy and Campaigns at Consumer Action.

‘We all know the devil is often in the detail, but it is not unreasonable for consumers to expect the fine print to reflect what’s in the headline. We raised Radio Rentals’ adverts with ASIC because we think it is very likely that some consumers would read their slogan and misunderstand the nature of the deal,’ said Mr Brody.

‘If the contract was a credit contract—that is, a contract where there is a right or obligation to purchase the goods, then Radio Rentals would have to disclose costs of credit before the contract is entered into. With consumer leases, contractual disclosure requirements are different.  It looks to us like Radio Rentals want to have it both ways—on the one hand they are subject to the different disclosure requirements that apply to consumer leases at law but on the other hand their advertising arguably creates the impression that consumers are getting more than a lease.

Consumer Action has also asked ASIC to consider Radio Rentals’ headline claim focusing on weekly repayment amounts. It believes focusing on a weekly amount, without giving equal prominence to the minimum cost of the contract, is likely to give a false impression of the product’s cost.

‘Five dollars a week in isolation may look affordable, but when you consider that the minimum contract term can be 36 months, all those five dollars start to look a lot more expensive—but this overall cost isn’t advertised. If a consumer wants to return goods before a minimum contract term, then significant termination fees commonly apply. It’s not unreasonable to expect rental companies to include the total cost of a product in their marketing.

‘Phone and internet adverts have to include a contract term and the minimum overall cost—it helps put monthly fees into context and gives consumers a chance to compare products and offers. We can’t see any reason why Radio Rentals shouldn’t be required to do the same in their advertising,’ said Mr Brody.

Mr Brody said disclosure of costs and terms was important to help consumers make considered decisions about what they buy. ‘Consumers should be able to compare apples with apples—it’s a good thing for competition and has positive results for consumers.’

‘We want Radio Rentals to increase disclosure so that customers can make informed decisions about what they sign up for. Leases are often a really expensive way of obtaining goods, and consumers should go into these deals with their eyes open.’