Low-income consumers out of pocket
Shadow Minister for Human Services Senator Doug Cameron's bill calling for businesses that lease goods to financially strapped consumers to be cut off from Centrepay has passed the Senate and will now move to the House of Representatives.
The free bill-paying service for customers who receive Centrelink payments was originally set up for the payment of rent and utility bills, but critics say consumer leasing businesses have exploited the system to prey on vulnerable consumers.
Earlier this year a consumer leasing business that specialises in white goods, computers and other electronics and has access to Centrepay, Make It Mine, was found to have breached consumer credit laws in Federal Court.
Among other things, Make It Mine failed to inquire about whether the rental rates were affordable for more than 20,000 customers between April 2011 and March 2013, a requirement under responsible lending obligations.
Consumers on government benefits leased the Make It Mine goods through instalment payments, which were generally deducted via the Centrepay facility automatically. Renters merely had to sign the leasing contract for the deductions to begin and weren’t informed about the ins and outs of the deal.
How much am I paying?
Worse, Make It Mine left customers in the dark about the actual retail value of the goods or how much interest they’d be paying, which can add up to as much as 40% a year according to Cameron. The business also operated without a credit licence for nine months.
Following the court ruling, ASIC Deputy Chairman Peter Kell said "it’s particularly important that firms offering credit to low income consumers comply with responsible lending obligations. ASIC will continue to take action where we see vulnerable consumers at risk of inappropriate lending."
Another consumer leasing company, Radio Rentals, reportedly receives $90 million a year via automatic Centrepay deductions, accounting for about half of the company’s revenue.
Welfare workers say consumer leasing was originally set up as a short-term solution for people caught up in a family or housing crisis and wasn’t meant to open up a new market for leasing businesses.
Senator Cameron said earlier this year that "there has been a strong case for a long time for excluding consumer leasing businesses from Centrepay".