Consumer groups are urging the federal government to change consumer lease laws that allow companies to target vulnerable Australians and can leave them paying up to 15 times more for common household goods and potentially never own them.
Consumer leases are a growing concern for community legal centres across the country. They allow people to take possession of goods such as fridges or televisions from companies for what appear to be small weekly or monthly fees.
But they often contain hidden clauses that can dramatically increase costs over time and often don’t allow a person to actually own the goods at the end of the lease term. Consumer groups also say they are frequently targeted at vulnerable and low socioeconomic groups and individuals.
The former assistant treasurer Josh Frydenberg commissioned a Treasury review that focused on consumer leases and pay day loans.
The review was released in March 2016 and recommended capping consumer leases at 10% of a person’s income, so they could not sign up to an agreement that they were unable to later pay. It also flagged changes that would compel lease providers to disclose the full costs of the lease up front.
But it has remained largely untouched. A spokesman for the minister for revenue and financial services, Kelly O’Dwyer, said the government would respond and seek to implement changes before the end of the year.
Redfern Legal Centre’s debt and credit solicitor, Will Dwyer, said the Treasury review made positive recommendations that aligned significantly with concerns raised by consumer groups. He said there had been “no movement” from government in response to the review.
“It was provided to government in March this year but really there’s been no effective response yet,” he said. “These recommendations are pretty common sense for reducing consumer harm and increasing the transparency around these products, so it’s overdue for response.”
Dwyer said consumer lease arrangements can seem initially to be quite affordable. But their complexity means that people often “don’t understand what they’re signing up to and there are misrepresentations made by lease providers about the overall cost of the lease”.
“Quite often these arrangements would mean they would be borrowing the goods and would not own them at the end.”
Kat Lane, principal solicitor at the Financial Rights Legal Centre, said that consumer leases were a “fundamentally misleading contract”.
“At the end of the day the big problem with these leases is just how expensive they are,” she said. “The most fundamental problem is that people go in thinking they’re buying the goods. But they’re not. There’s a fundamental misleading conduct that just goes on and on and never gets fixed.
“Every day that goes by is another day where someone is ripped off. There’s thousands of them every day. I hate to think how many people are getting in to these contracts that I don’t think are fair.”
Gerard Brody, the chief executive officer of the Consumer Law Centre, said he would like to see the government respond to the report “as soon as possible.”
“Too many people are having their finances made worse by inappropriate credit products, and the review recognised there was a need to reform consumer leases,” he said.
A spokesman for O’Dwyer said: “The government will be in a position before the end of the year not only to respond but to look at the implementation of a lot of these recommendations.”
Paul Farrell, The Guardian.
