The Coalition government is acting to reduce the risk of consumers being unable to meet their basic needs due to repeated use of small amount credit contracts (SACC) or expensive consumer leases.
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The government has accepted the key recommendations of the independent review into SACC laws.
Key findings of the review were: – Repeated borrowing in Australia is high. The average SACC consumer takes out more than three small loans each year. This can result in debt spirals and is an indication of financial distress. – There is no cap on what consumer lessors can charge.
Consumers of SACC and consumer leases are often Centrelink recipients, or low income earners, who have limited access to mainstream credit. Half of all consumer lease repayments are provided through Centrepay (Centrelink’s payment deduction system). The average gross income of SACC consumers is $35,702 per year.
It is important that access to emergency finance and consumer goods does not worsen low income consumers’ financial circumstances.
The key recommendations adopted: – Capping limits on SACC and lease repayments to 20 per cent of a person’s income. – Capping the prices lessors can charge.
This will allow consumers on the lowest income (single person on government allowance) to access two concurrent $500 SACCs over one year and lease consumer goods to the value of $2,071 over three years.
This will enable access to emergency finance, and allow for the lease of a range of consumer goods such as a 436L fridge, a 5.5kg top load washing machine, a 14 place setting dishwasher, a 750W microwave and a 4kg clothes dryer.
We believe the response strikes the right balance between protecting vulnerable consumers and minimising the regulatory burden on industry.
It is intended the changes will apply 12 months after the passage of the legislation through Parliament.
Legislation will be introduced in 2017.
