Australia: Major changes proposed to small amount credit contracts and consumer leases - consultation ends soon

Key Points:

Small amount credit contracts providers and lessors of household goods would have new obligations if the recommendations of the Review of the Small Amount Credit Contract Laws are enacted.

Credit contract lenders and providers of consumer leases could be forced to make significant changes to their businesses, if the 24 recommendations in the final report of the Review of the Small Amount Credit Contract Laws, released for consultation two weeks ago, are accepted by the Federal Government.

Businesses should review the recommendations and make submissions within the four-week consultation period which closes on Tuesday, 17 May 2016.

Background to the Small Amount Credit Contract Review

The terms of reference for the review were released on 7 August 2015 and the report was finalised on 3 March 2016 after more than 70 responses were received by the panel conducting the review.

The 24 recommendations affect:

  • small amount credit contracts (SACCs);
  • consumer leases; and
  • both SACCs and consumer leases.

Small amount credit contracts recommendations: repayments, fees caps, bans on unsolicited offers and referral payments

All SACCs should be subject to regulations concerning protected earnings amounts under which SACC repayments will be capped at 10% of the consumer's net income. Currently, protected earnings amount regulations only apply to a class of consumer who receive at least 50% of their gross income as payments under the Social Security Act 1991 and the cap applied is 20% of the consumer's gross income.

If these changes are accepted, the report recommended retaining the existing 20% establishment fee and 4% monthly fee maximums, and the removal of the rebuttable presumption that a loan is unsuitable if either the consumer is in default under another SACC, or has had two or more other SACCs in the 90 day period before the assessment.

The existing ban on credit contracts with terms less than 15 days should be maintained.

Direct debit fees should be incorporated into the existing SACC fee cap. The Government has indicated its support of this recommendation and ASIC acting on it when ASIC considers it to be appropriate.

The definition of SACC under the National Credit Act should require that repayments be equal over the life of the loan (with exceptions where suitable, for example if a final repayment is a lesser amount for legitimate reasons). This recommendation was made to prevent lenders from front-loading repayments and unnecessarily extending loans.

A SACC database should not be introduced, however major banks should be encouraged to participate in comprehensive credit reporting at the earliest date. There should, however, be further consultation on this, and using of unique identifiers for SACC repayments made through the direct debit system as an alternative option to the introduction of SACC database.

The National Credit Act should be amended to prohibit the charging of a monthly fee for a month after a SACC is discharged by its early repayment. This would align with the approach to interest under the National Credit Act (which says it cannot be charged before the end of a day to which an interest charge applies).

SACC providers should be prevented from making unsolicited offers to current or previous consumers (in any form). This prohibition would go much further than the National Credit Act's current ban on sending of unsolicited credit card limit increase offers unless the consumer has consented.

SACC providers should not receive a payment or any other benefit for a referral made to another SACC provider, and further work be undertaken to determine whether lead generators should also be subject to this prohibition.

Default fees should be capped to a representation of the actual costs to a lender arising from a consumer defaulting on a SACC and to an absolute maximum of $10 per week (with the existing limitation on the amount recoverable in the event of default to twice the adjusted credit amount being retained).

Consumer leases: caps on cost, protected earnings amounts restrictions

A cap on the cost of consumer leases should be introduced, calculated as a multiple of the base price of the goods rather than an annual percentage rate. It should also allow a return of 4% of the base price of the goods per month of the lease. This aligns with the 4% monthly fee allowed for SACCs, however unlike SACCs an additional 20% establishment fee would not be allowed. For leases of greater than 48 months, the report recommended that calculation of the cap should be based on a lease term of 48 months.

The base price should be the lower of the recommended retail price and the price agreed in store. The report also recommended that further work should be done to define the "base price" for second-hand goods and noted the difficulties that arise in relation to the calculation of the base price where the lessor leases its own branded goods.

The cost (if any) of add-on services and features other than delivery should be included in the cap and a separate one-off delivery fee should be permitted (though this should be limited to the reasonable costs of delivery, taking into account any cost savings of bulk delivery of goods to an area).

Protected earnings amounts restrictions should be introduced for leases of household goods in line with the recommended approach to SACCs, ie. 10% of the consumer's net income. The report also recommended that the Department of Human Services consider making this cap and the cap on the cost of consumer leases mandatory as soon as practicable for lessors who utilise or seek to utilise the Centrepay system.

The maximum amount that a lessor can charge on termination of a consumer lease should be imposed by way of a formula or principles that provide an appropriate and reasonable estimate of the lessor's losses from early repayment.

Unsolicited selling of consumer leases of household goods should be prohibited.

Finally, it suggests further consultation be undertaken on whether the cap on the cost of consumer leases should apply to consumer leases of motor vehicles, and the Government should also consider extending the report's other recommendations relating to consumer leases of household goods to consumer leases of motor vehicles.

SACCs and consumer leases: use of bank statements, new warnings, disclosure, civil penalty regime

Lessors of household goods should be required to obtain and consider 90 days of bank statements (in line with the existing requirement for SACC providers), and they and both SACC providers should both be prohibited from using information obtained from bank statements for purposes other than compliance with the responsible lending obligations. Additionally, ASIC should continue its discussions on ensuring that ePayments Code protections are retained where consumers provide their bank account log-in details to a third party in these circumstances.

SACC providers and lessors should be required to document in writing their assessment that a proposed contract or lease is suitable at the time the assessment is made.

Lessors under consumer leases of household goods should be required to provide consumers with a warning statement. The report also recommended that ASIC be given the power to modify the requirements for the statements to maximise the impact on consumers for both the proposed warnings statement for consumer leases of household goods and the existing warning statement provided in respect of SACCs.

SACC providers and lessors under a consumer lease of household goods should be required to disclose the cost of their products as an annual percentage rate and those lessors should also be required to disclose the base price of the goods being leased and the difference between the base price and the total payments under the lease.

The application of the existing civil penalty regime should be extended to consumer leases of household goods and to SACCs. The report also recommended that rights under the contracts to charges be automatically lost if certain specific obligations are contravened.

Finally, the National Credit Act should regulate indefinite term leases, address avoidance through entities using business models that are not regulated by the National Credit Act and address avoidance of the restrictions on the maximum amount that can be charged under a consumer lease of household goods or a SACC, or any of the conduct obligations that only apply to a consumer lease of household goods or a SACC.

Next steps: submissions due by Tuesday, 17 May 2016

The Government has indicated that it will consult with industry and consumers before making any decisions on the recommendations, however it has already provided its support of ASIC acting on the inclusion of direct debit fees within the existing cap on SACC fees when it considers it appropriate.

The Government has invited interested parties to comment on the recommendations by Tuesday, 17 May 2016, and asked Treasury to further consult on:

  • whether the consumer lease recommendations should apply to all consumer leases (including motor vehicles) rather than only to leases of household goods; and
  • how to treat second-hand goods.

You might also be interested in...

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.