Radio Rentals made $90 million from Centrelink payments last year

Updated March 20, 2015 12:21:25

Photo: Radio Rentals receives a large portion of its revenue from Centrelink, via the Centrepay system. (AAP)

Map: Australia

Centrelink payments made up almost half of white goods leasing market leader Radio Rentals' revenue last year, the ABC can reveal.

Last financial year the company's total revenue was $197 million, and $90 million of that came from the federal Department of Human Services through the direct debit Centrepay system.

The Centrepay system was originally designed to help Centrelink customers budget, with money for bills directly debited from bank accounts as soon as benefits are paid.

However, in recent years payments for more discretionary spending — such as leasing flat screen televisions and sounds systems — have increased.

In 2011/12, 11 per cent of all Centrepay payments went towards the rental of household goods, with consumers often paying a high premium throughout the course of the rental agreements.

A report released this month by finance company Credit Suisse found that half of the Centrepay revenue received by Radio Rentals, or about $45 million, was for entertainment items like televisions or smart phones.

The report warns investors that any change to the "light handed" regulation of the consumer leasing industry would have a significant impact on Radio Rentals' business.

Consumer Action Law Centre chief executive officer Gerard Brody said it was scandalous that Radio Rentals enjoyed such business security from the welfare system.

"We have had long-held concerns about Radio Rentals and the consumer lease industry's use of the Centrepay system," Mr Brody said.

"But to see in this report that such a high proportion of their revenue being paid from people who are Centrelink recipients, they are people on welfare payments and this business is sustaining itself on that, is astounding."

Radio Rentals advertisements aimed at those on benefits

Radio Rentals advertisements target people on Centrelink benefits, with one promotion saying, "I'm on benefits and I got a fair go."

Adam Mooney from not-for-profit lender Good Shepherd, which provides no-interest loans to disadvantaged Australians, says there are affordable options other than leasing from companies like Radio Rentals.

"If you want a fridge that costs $650, for Radio Rentals their average contract will see you pay three times that, around $1,800," Mr Mooney said.

"For us, you take out a no interest loan from one of our 600 locations and you pay $650 over 18 months, rather than $1,800 over two, three years.

"So there are alternatives out there."

Photo: Norma says she signed up to lease a Dyson vacuum cleaner from Radio Rentals three years ago.

"Norma" is a grandmother who lives in Sydney's western suburbs. She signed up to lease a Dyson vacuum cleaner from Radio Rentals three years ago.

Since then she has paid about $40 a fortnight, for a total of more than $2,000.

She has more than a year left on her Radio Rentals contract with another $900 to pay.

"It was just one of those spur of the moment things that I did and now I'm regretting every single day, not the vacuum but the whole deal," Norma said.

Calls to ban consumer leasing

Both the Consumer Action Law Centre and Good Shepherd Microfinance are calling on the Federal Government to ban consumer leasing from the Centrepay system.

Centrelink recipients are already barred from paying back cash loans through the Centrepay system, and as a result Mr Mooney said there has been a big increase in consumer leasing.

"Investors in pay day lenders have now downed tools and moved across to this lucrative, burgeoning, effectively unregulated market where you can literally write your own ticket," Mr Mooney said.

Federal Minister for Human Services Marise Payne said she was investigating regulatory reforms to the industry, but a ban on consumer lending through the Centrepay system was not being considered.

"I would like to say watch this space," Senator Payne said.

"We really do have the opportunity to make some quite useful protections for some of our most vulnerable customers."

A spokesperson for Radio Rentals said the company has been helping consumers access household goods for 75 years and was focused on giving consumers a fair go.

"Many people need financial help in getting household goods, just as many people need rental accommodation," the spokesperson said.

"Radio Rentals has a strong commitment to protecting consumers, providing full disclosure on product costing and in making sure it does not provide goods beyond people's capability to afford them."

Labor 'prepared to work in a bipartisan way' to address concerns

Labor spokesperson for Human Services, Senator Doug Cameron, has called for an urgent briefing from the Government following the revelations.

"I'm prepared to work in a bipartisan way with the Government to make sure the most vulnerable people aren't ripped off," Senator Cameron said.

"Labor will not accept that the rights and the interests of companies who are charging exorbitant interest rates ... come before the vulnerable in our society."

He said Radio Rentals should be removed from the CentrePay system if it was found to be charging vulnerable people exorbitant prices to rent whitegoods and electronic equipment.

However, he emphasised that he did not want to see access to such goods curtailed by any changes to the system.

"To exclude welfare recipients to having access to some of the necessities of society would be unfair," he said.

"It's tough enough for welfare recipients, we should be supporting them to engage in society and not exclude them from what are pretty basic things these days."

Topics: welfare, community-and-society, business-economics-and-finance, australia

First posted March 20, 2015 00:06:50