New Small Amount Credit Contract and Consumer Lease Reforms

The Treasury has released exposure drafts for further reform for the Pay Day (SACC) and consumer lease sector (FINALLY)!

The exposure draft 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 Draft Bill implements the Government’s response to the Review. This includes:

  • imposing a cap on the total payments that can be made under a consumer lease;
  • requiring small amount credit contracts (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 lessors and credit assistance providers from undertaking door-to-door selling of leases at residential homes;
  • introducing broad anti-avoidance protections to prevent SACC loan and consumer lease providers from circumventing the rules and protections contained in the Credit Act and the Code; and
  • strengthening penalties to increase incentives for SACC providers and lessors to comply with the law.

Deadline for submissions is 3rd November 2017.

Author: Martin North

Martin North is the Principal of Digital Finance Analytics

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