New laws will prevent vulnerable Aussies from being ripped off by dodgy lenders.
New small amount credit contract (SACC) laws will mean that struggling Aussies will no longer be charged up to 880 per cent interest on leases for basic household goods.
The Federal Government has accepted 21 of 24 recommendations that will help protect vulnerable consumers from unscrupulous financial institutions trying to rip them off.
"Implementation of these recommendations will ensure that vulnerable consumers are afforded appropriate levels of consumer protection while continuing to access SACCs and leases," said Kelly O'Dwyer.
The SACC review targeted payday lending and consumer rent-to-buy leasing practices.
Previous inquiries revealed that Australians were being ripped off, paying the highest lease prices for basic household goods, such as dryers and fridges.
One struggling Aussie was reported to be leasing a $345 dryer which, when charged an interest rate of 884 per cent, ended up costing $3040.
Because of the latest inquiry, a cap will be placed on total lease payments equal to the original price of the goods, plus 4 per cent of that price each month. There will also be a cap on lease payments equal to 10 per cent of a borrower’s income.
The Government will also apply new rules to lending practices, preventing borrowers from taking out small loans if they have previously defaulted on an earlier loan or already have two or more other loans. It will also seek to ban unsolicited offers of payday loans to help stop Australians from overcommitting.
The Consumer Action Law Centre welcomed the announcement, saying it was a "good start" in stopping payday lenders and rent-to-buy companies from ripping off vulnerable Australian families.
The Consumer Household Equipment Rental Providers Association is not happy with the decision, saying that half a million low-socio economic families could lose access to electrical goods due to the negative effect on the consumer leasing industry.
Read more at The Age.
What do you think about the new laws? Have you ever fallen afoul of unscrupulous lenders or payday loans?