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Radio Rentals faces compensation bill over alleged breaches

The company behind consumer finance group Radio Rentals is expecting to be hit with civil penalties over alleged breaches of responsible lending rules. 

Thorn Group told the stock exchange that it may have to pay compensation to customers who did not meet minimum income thresholds for their contracts following a probe by the Australian Securities and Investments Commission. 

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The company told shareholders the compensation bill could result in a $4 million hit to profits.

"Discussions with ASIC have now reached a point where Thorn Group anticipates that ASIC will seek a civil penalty and require further compensation and remediation," it said in a statement.

"In light of this, the board considers it prudent to make a further provision with a $4 million profit after tax impact in its financial statements". 

Shares in the company fell 7 per cent on Tuesday.


ASIC confirmed that an investigation into Radio Rentals was under way but would not give any detail on alleged breaches or potential civil penalties.

Radio Rentals leases household goods and appliances through "rent to buy" schemes.

The company said it still expected to report a net profit of between $24 and $26 million for the year ending March 31, despite the new provisions.

A spokesperson for Thorn declined to comment on the investigation.