The Assistant Treasurer, Senator the Hon Arthur Sinodinos AO, has today announced the Government will explore options to address problems with indefinite and short term leases, creating new safeguards for more vulnerable consumers who have few alternative sources of finance.
The Government is concerned that consumers are disadvantaged by the use of unregulated leases. These leases let consumers lease items such as fridges and other household goods over a period of time and consumers are required to make regular rental payments.
“There are cases where it appears that fringe lessors have targeted classes of consumers who are particularly vulnerable, such as where consumers are on Centrelink, pensions or low incomes and have few or no other alternative sources of finance,” said Senator Sinodinos.
“These customers may not understand the lack of consumer protections, and are often unaware that these leases do not come with consumer protections.”
Currently, short term leases of four months or less, as well as indefinite leases that have no fixed end date, are not regulated by the national credit laws.
The enhanced consumer protections that apply to other leases and forms of personal credit, such as licencing, responsible lending requirements and mandatory external dispute resolution membership, do not apply to these leases.
Consumers may be disadvantaged by the use of an unregulated lease relative to a consumer lease, for example, through lack of responsible lending obligations which check a consumer’s capacity to pay.
The absence of responsible lending conditions on these leases allows providers to offer finance faster to consumers, which may draw them away from regulated options.
“I consider that the treatment of the indefinite and short term leases needs further consideration, and I have requested that Treasury consult with stakeholders and look at options to address problems with these leases under existing Commonwealth powers,” said Senator Sinodinos.
These consultations will be conducted over the next six months.