ASX-listed Thorn Group has agreed to pay $25 million to settle a class action over allegations it misled customers when it told them they could buy items for $1 after leasing them.

In a statement, the company said it has not admitted liability but will pay the sum and that its insurer, AIG, will make a $4 million contribution to the settlement, which will end the insurer's obligations to any related claims.

The statement reads that the company "is confident that it will be able to meet its share of the settlement amount".

Law firm Maurice Blackburn launched the class action in 2017 on behalf of Ms Simpson, the lead plaintiff, who said in 2017 that she paid Radio Rentals $3320 for a used bed worth $480 and she still did not own it.

Instead of letting her buy the used bed for $1 when her 18-month contract ended, the appliance-rental giant allegedly continued to deduct weekly payments from her Centrelink account.

The class action alleged that about 200,000 people paid excessive amounts on the firm's 'Rent Try $1 Buy' leases because they were not automatically entitled to buy items for $1 as suggested.

In 2017, Ms Simpson said she felt unfairly treated and taken advantage of.

"If it's happened to me, it's likely to have happened to many others," she said.

"That is why I have decided to stand up and take this action to hold Radio Rentals to account."

Ms Simpson at the time said she was a low income and though the firm's lease program "would be a sensible alternative to get some basic goods in a way we could afford".

"I never knew I'd have to pay as much as they kept charging me, or that I wouldn't have a right to buy the goods for $1," Ms Simpson said.

Maurice Blackburn said that while advertising suggested customers could buy rented appliances or furniture for $1 after their lease, contract fine print stated that customers could negotiate a price with Radio Rentals.

If customers failed to secure a purchase, contracts automatically rolled over into another term between 24 and 48 months.

The settlement is less than the $50 million sought when the class action was launched in the Federal Court.

However, Rebecca Gilsenan, principal lawyer at Maurice Blackburn Lawyers, said the case was still successful in highlighting the problem, holding the company to account, and compensating consumers who had been ripped off.

"This was a very difficult case to run, and a difficult case to win, but it was important that this case be brought to illuminate what goes on too often with businesses that deal with vulnerable Australians," Ms Gilsenan said.

Thorn Group also last year paid $6.1 million in remediation and a $2 million civil penalty after an Australian Securities and Investments Commission investigation found Thorn lending to customers who did not meet minimum income thresholds for their contracts.

The settlement terms will be put before the Federal Court for approval in the coming months, as is the usual practice for class action settlements.

Daily Advertiser with AAP