A bill amending the National Consumer Credit Protection Act, which was introduced in the House of Representatives this week, includes protections for consumers taking out small amount credit contacts and consumer leases that are weaker than the measures the government included in a draft bill in 2017.

While discussion of the bill, National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020, has focused on the contentious decision to remove responsible lending obligations from the legislation, changes to the SACC and consumer lease protections are no less controversial.

Back in 2017, the government released a draft bill for consultation, incorporating many of the recommendations of the Independent Review of Small Amount Credit Contract Laws.

The draft bill introduced a cap on the total payments that can be made under a consumer lease. It required small amount credit contracts to have equal repayments and equal payment intervals. It banned door-to-door selling by lessors and credit assistance providers.

A part of the 2017 draft was a change to the protected earnings cap. Under current legislation, consumers who earn half or more of their income from social security payments can only commit up to 20 per cent of their income to repayment of an SACC.

The 2017 draft changed to cap to 10 per cent, extended it to consumer leases and made it apply to all consumers, regardless of the source of their income.

The government never proceeded with its 2017 draft, which has been put down to successful industry lobbying.

The bill now before Parliament includes a provision that says consumers who receive 50 per cent of their income from social security payments can only commit 20 per cent of their income to total repayments under and SACC contract and a consumer lease. Within that 20 per cent, the total repayments under an SACC cannot exceed 10 per cent of income.

This is not far from the original bill but the situation for other consumers is very different. For all other consumers, a licensee most not enter into an SACC with a consumer if the total repayments would exceed 20 per cent of income. Likewise, a licensee must not enter into a consumer lease with a consumer if total payments would exceed 20 per cent of income.

The effect of these provisions is that a consumer with an SACC and a consumer lease could end up paying 40 per cent of their income.

One issue that concerns consumer groups is that, while providers of SACCs will be governed by responsible lending obligations, providers of larger loans will not.

SACCs are loans of up to A$2000. There is a risk that lenders will offer vulnerable borrowers larger loans to get over the RLO threshold.

The new bill retains the prohibition of door-to-door selling but defines it very narrowly as “visiting a place of residence for the purpose of inducing a person who resides there to apply for or obtain a consumer lease”.

In practice, door-to-door selling can involve a company arriving in a remote community and setting up shop to spruik its wares to the locals.