Taking action to protect vulnerable consumers
EXPOSURE draft legislation to increase protections for the vulnerable consumers who access Small Amount Credit Contracts (SACCs) and consumer leases has been released for two weeks of consultation.
This legislation implements the Government’s response to the Review of the Small Amount Credit Contract Laws previously by the Minister for Revenue and Financial Services on 28 November 2016.
Minister for Small Business Michael McCormack said these reforms will increase financial inclusion and reduce the likelihood of vulnerable consumers defaulting on repayments and encountering difficulties meeting their basic needs.
“The reforms balance access to emergency finance and household goods with appropriate consumer protection,” Mr McCormack said.
“This review was conducted by a panel of Industry experts who have critically examined the gaps in current legislation and made a number of recommendations.
“The statutory review found these high-cost products have the potential to result in very poor consumer outcomes, including interest rates up to 884 per cent and inescapable debt.
“These reforms will protect vulnerable consumers while ensuring the sustainability of the industry.”
The proposed reforms aim to:
- introduce a cap on the total payments of a consumer lease;
- introduce a protected earnings amount requirement for consumer leases of household goods of 10 per cent of income for all consumers; and
- extend the SACC protected earnings amount requirement to all consumers and lower it to 10 per cent of a consumer’s income.
The Government will introduce legislation this year to implement the SACC and consumer lease reforms.
All interested stakeholders are encouraged to participate in the consultation process and make a submission. Details on how to make a submission can be found on the Treasury website https://treasury.gov.au/consultation/c2017-t229374/