Chapter 1 Background Outline of chapter This chapter outlines the context and scope of reforms to SACCs and consumer leases that are contained in the Bill. It also provides a summary of the Regulation Impact Statement for the reforms contained in the Bill, which is also being consulted on as part of this consultation process. Context of amendments The exposure of the National Consumer Credit Protection Amendment (Small Amount Credit Contract and Consumer Lease Reforms) Bill 2017 (the Bill) introduces a range of amendments to the Credit Act to enhance the consumer protection framework for SACCs and consumer leases. The amendments contained in the Bill are to be complemented by amendments to the Credit Regulations, which will be consulted on separately at a later date. The new SACC and consumer leasing provisions will promote financial inclusion and reduce the risk that consumers may be unable to meet their basic needs or may default on other necessary commitments. The Bill implements the Government’s response to the Review of the Small Amount Credit Contract Laws (the Review) that was conducted by an independent panel chaired by Ms Danielle Press. The Review was publicly released in March 2016. The Government’s response to the Review was released by the Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, on 28 November 2016. The key reforms to be introduced by the Bill include: imposing a cap on the total payments that can be made under a consumer lease; requiring SACCs to have equal repayments and equal payment intervals; removing the ability for SACC providers to charge monthly fees in respect of the residual term of a loan where a consumer fully repays the loan early; preventing SACC providers and credit assistance providers from making unsolicited invitations to apply for credit and unsolicited credit offers to current or former SACC customers;
Lessors will be required to collect and consider 90 days of bank statements prior to providing a consumer with a consumer lease for household goods. The Bill will enable the Credit Regulations to implement a new 10 per cent protected earnings amount for consumer leases. Lessors of household will be required to disclose the base price of the goods and the difference between the total payments and the base price. Lessors will also be prohibited from undertaking door to door selling of consumer leases for household Comparison of key features of new law and current law New law Current law There is a cap on the cost of consumer leases. No equivalent provision. When verifying a consumer’s financial situation, lessors of household goods must obtain and consider 90 days of bank statements. is a general obligation to take reasonable steps to verify a consumer’s financial situation. There will be a specific regulation making power enabling the Credit Regulations to create a new protected earnings amount for consumer leases. No equivalent provision. Lessors of household goods are prohibited from visiting a place of residence for the purpose of inducing a person who resides there to apply for or obtain a lease, except by prior arrangement. Credit providers (but not lessors) are prohibited from visiting a place of residence for the purpose of inducing a person who resides there to apply for or obtain credit, except by prior arrangement. Lessors of household goods are required to disclose the base price of the goods being leased and the difference between the base price and the total repayments. Lessors are required to disclose the total amount of rental payments under the lease. Detailed explanation of new law Concept of ‘consumer lease for household goods’ The Bill introduces the concept of a ‘consumer lease for household goods’, defined as a consumer lease where any of the goods under the lease are ‘household goods’. [Schedule 1, items 1 and 64, the definition of ‘consumer lease for household goods’ in subsection 5(1) of the Credit Act and in subsection 204(1) of the Code]