19 April 2016
Media Release - #2016038, 2016

In the role of: Minister for Small Business and Assistant Treasurer [21 September 2015 - 18 July 2016]

Small amount credit contract final report released

The Turnbull Government has today released the final report of the independent review of the small amount credit contract (SACC) laws.

The Minister for Small Business and Assistant Treasurer, Kelly O'Dwyer said the review has provided an appropriate opportunity to consider the laws that apply to regulated consumer leases.

"The final report has made a number of recommendations designed to increase financial inclusion and reduce the risk that consumers may be unable to meet their basic needs or may default on other necessary commitments," Minister O'Dwyer said.

"For SACCs, the panel found that refinements to the law are needed to improve consumer outcomes and that, the current regulatory framework for consumer leases of household goods is not effective in promoting financial inclusion."

Some of the key recommendations to both SACCs and consumer leases include:

  • retaining the existing price caps on SACCs;
  • extending the SACC protected earnings amount requirement to all consumers and lowering it to 10 per cent of the consumer's net income (currently for those consumers who receive 50 per cent or more income through payments from Centrelink, total SACC repayments are capped at 20 per cent of a consumer's gross income);
  • introducing a cap on the cost of consumer leases on household goods; and
  • introducing a protected earnings amount requirement for consumer lease providers of 10 per cent of all consumer's net income.

"Recommendation 4 of the report relates to the Australian Securities and Investments Commission (ASIC) capacity to ensure that direct debit fees to consumers be incorporated in the existing cap SACC fees. The Government is supportive of ASIC acting on this recommendation when it considers it appropriate.

"I would like to thank the Panel Chair, Ms Danielle Press and Members, Ms Catherine Walter AM and Mr Stephen Cavanagh for their detailed consideration of the issues," Minister O'Dwyer said.

Ms Press said that the recommendations seek to strike an appropriate balance between enabling consumers to access emergency finance when required, optimising the opportunity to improve their financial situation overtime, and the viability of an efficient industry.

The Government will consult with industry and consumers before making any decisions on the recommendations. Submissions can be made at www.treasury.gov.au until 17 May 2016.

"I have also asked Treasury to consult on some further issues raised," Minister O'Dwyer said. "In particular in respect of the consumer lease recommendations:

  • whether they should apply to all consumer leases (including motor vehicles) rather than only leases of household goods; and
  • the best way to treat second hand goods.

The review was established to fulfil a statutory requirement under the Credit Act to examine and report on the effectiveness of the law relating to SACCs.

The full report is available on the Consumer Credit website.