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Submission to the SACC Interim Report

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22 January 2016

We wrote a  submission responding to the interim observations and options put forward by the Small Amount Credit Contracts Review Panel (Payday Lending Laws Review). We supported almost all of the options put forward by the Interim Report as they all increase the effective regulation of payday loans and consumer leases.  Specifically we recommended:

  • Additional responsible lending obligations be required in relation to SACCS. The presumptions have not succeeded in addressing the harm as intended and are poorly complied with. ASIC enforcement should be a priority.
  • Consumer leases should be subject to the same level of protection as all other regulated products.
  • A cap of 48% per annum on the maximum amount a lessor can charge should be introduced for all leases, consistent with other regulated loans.
  • A 48% cap should apply to all types of consumer leases, not only low-value household and electronic goods.
  • There should be a limit imposed on the maximum length of leases to balance the benefits of lower repayments against the additional cost of credit incurred by longer term contracts. This could be set by reference to a number of years, or by limiting the total amount payable to a multiple of the cash price.
  • The cash price and accurate description of the goods must be disclosed on the consumer lease contract. A comparable interest rate should also be disclosed.
  • Include the cost of add on features under the cap whether paid for by cash or financed under the lease. If delivery charges are not included under the cap, they should be separately disclosed and capped and should not be permitted to be financed (incur interest payments).
  • There should be a 5% cap on the percentage of net income that can be committed to repayments, which includes the total amount of repayments made towards any SACC, Consumer lease or Centrelink advance.
  • Termination fee should be the lesser of: 1) The lessor’s reasonable costs incurred by reason of the termination or 2) Two months rental under the contract.
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