Following an Australian Competition and Consumer Commission investigation, Hertz admitted that between November 2013 and August last year it had incorrectly charged customers for causing damage to a rental car that was in fact pre-existing.

From January 2014 and August last year, Hertz refunded 283 customers about $243,000 in total.

Hertz also conceded that between January 2013 and August last year it had charged customers for repair costs it falsely claimed was the cost borne by the company.

In fact, Hertz received spare parts at a discount and did not pass on any savings. In cases involving windscreen or tyre repairs or replacements, the cost to Hertz was much lower than the amount charged to customers.

Hertz is refunding, or has refunded, $152,000 to more than 700 customers. Many of these customers are yet to be identified and contacted about the refund.

"This case serves as a message to vehicle rental companies that they must have robust compliance procedures in place to ensure they do not contravene the Australian Consumer Law by incorrectly charging customers for damage they are not responsible for," said ACCC deputy chair Michael Schaper.

"Vehicle rental companies must also ensure that they are transparent and accurate in communicating with their customers about the charges they are applying for vehicle rentals and repairs."

Hertz has acknowledged its conduct was likely to have breached the Australian Consumer Law prohibitions on misleading or deceptive conduct and false or misleading representations.

Hertz has taken voluntary steps to improve its damage charging and assessment practices, and has also provided a court-enforceable undertaking to the ACCC which says it will contact and refund all affected customers.

The undertaking follows recent ACCC court action against car hire company Europcar Australia, in respect of alleged unfair contract terms and misleading advertising of its "extra cover" products. The parties are awaiting judgment.

A statement from Hertz said the company has invested significant resources to address the concerns about its "historical procedures" for vehicle damage charges.

"Steps already implemented by Hertz include proactively contacting customers who were incorrectly charged for pre-existing vehicle damage, as well as the ongoing review of records to identify any other customers who have potentially been impacted by its historical processes," the company said.

"Customers affected by this error will be refunded where appropriate and necessary."