Ann: Thorn agrees settlement with ASIC, page-15

When reading http://asic.gov.au/about-asic/media...r-refunds-for-poor-appliance-rental-outcomes/, one should remember that there are three TGA issues that involved ASIC. The ASIC communication only covers the second two of them. The ASIC communication is not easy to read, so I could have misunderstood the facts mentioned below.

The first matter (not covered by the ASIC communication) is that for years customers had often overshot the lease expiry dates, and continued to remit money to TGA for one or more payment periods. The average per closed-customer account tended to be small, but the large number of then amounted to about $3m. TGA brought this matter to ASIC's attention, and it was not a matter that suggested a penalty. ASIC and TGA also agreed that funds owed to closed-account customers who could not be located be gifted to charity. The EOY report stated that $1.1m was outstanding as at 31/03/2017.

The second matter is that current customers often paid more than they were obliged to pursuant to their contracts, and TGA simply credit them, thus allowing customers to build up credit balances. Customers may have good reasons to pay a bit more, but TGA is disallowed to take the extra, because it is not an Authorised Deposit-taking Institution. At 31/03/2017, $10.5m was in credit and repayable to customers. According to the EOY report, these amounts have always been held on balance sheet as liabilities, so the NPAT impact is limited to the interest component and the cost of effecting the repayments.

My understanding of the third matter is that TGA tended to be lax about adjusting its lending criteria to the constantly-adjusted Henderson Poverty Index, which is used to calculate the lease payments that do-gooders deemed customers can afford to pay. The $6.1m mentioned as a provision in the EOY report, and the same amount mentioned in the ASIC announcement, probably cover this matter, except that the EOY stated “including anticipated remediation costs and penalties.”, so there may be a $2m provisioning shortfall to cover the suggested penalty.

I am not sure how to reconcile the $10.5m mentioned in the EOY report, and the $13.8m mentioned in the ASIC report, other than to suggest the third matter listed above occasioned an expense of about $3m, and also, the EOY report predates the ASIC announcement by many months, so further customer credits could have happened, because TGA had to negotiate with customers to either repay them, or suspend lease payments for a while. Why ASIC interfered with this matter seems strange. Welfare recipients often have good reasons to keep money out of their own reach, and that of the bludgers who surround them. The TAB agencies, liquour outlets,  drug dealers and fast-food mongers will be happy though.

Apart from the fact that a court must apply the penalty, and the provisioning may be $2m short, this matter is substantially over. I wonder if there is still enough fat in these matters to make the Class Action viable?