Regulations giving effect to an overhaul of the law covering small amount credit contracts and consumer leases have been formally registered by the Governor-General, ahead of the reforms taking effect next month. National Consumer Credit Protection Amendment (Financial Sector Reform) Regulations 2023 detail the operation of the Financial Sector Reform Act 2022, which was legislated in December. The key reform deals with protected earnings. Under the old law the protected earnings amount rule said that if a consumer received at least 50 per cent of their gross income from social security payments, 80 per cent of their income was protected and could not be used to repay a SACC. The new law extends the protected earnings amount to all consumers. It prohibits licensees from entering into a SACC if the repayments under the contract would not meet the requirements prescribed by regulations. This rule will also apply to consumer leases for household goods. The regulations require that the total amount of repayments under a SACC or a consumer lease for household goods be equal to or less than 10 per cent of the “available income” the consumer is reasonably expected to receive during the repayment period. “Available income” is defined as the consumer’s income less any amount withheld under the pay as you go withholding system. The income requirement is designed to ensure that financially vulnerable consumers do not enter into a SACC or consumer lease for household goods “where doing so would require them to repay an amount that would put them at risk of significant financial distress”. According to lending industry commentary, the new protected earnings amount is likely to dampen activity in the SACC and consumer lease markets. In addition to specifying the protected earnings amount, the draft regulations add an additional requirement that licensees verify the financial situation of consumer before entering into a contract with them, specify the calculation method for the base price of goods hired under a consumer ease and establish early termination fees principles for consumer leases. The new law makes several other changes to the rules covering small amount credit contracts, including:·      requiring SACCs to have equal payments and equal repayment intervals over the life of the loan;·      prohibiting the lender from charging monthly fees in respect of the residual term of a loan where it is repaid early;·      prohibiting licensees from making unsolicited communications to consumers;·      requiring licensees to document in writing their assessment that a SACC is not unsuitable for a consumer; and·      requiring licensees to give information to consumers about SACCs in accordance with ASIC requirements. The key rules covering consumer leases include the introduction of a cap on the amount a lessor can charge, and a requirement to disclose the base price of the goods being hired under the lease and the difference between the total amount payable by the lessee and the base price. Lessors will also be prohibited from making unsolicited communication and will have to document their assessment that a consumer lease is not unsuitable for