Australian consumers have never had so much choice when it comes to paying for the products and services they want.
Whether it’s credit cards, consumer lease, lines of credit or Buy Now Pay Later, there’s a multitude of financial services that can help spread the cost of big purchases.
But while these products paint themselves as consumer champions, there is often a hidden cost when accessing “easy” credit that can have a long-term impact.
Where responsible companies will ensure the credit you get is tailored for your circumstances, some are more than happy to allow you to borrow beyond your means.
This increases the potential of falling into a cycle of debt, especially for young Australians, which may lead to a detrimental impact on their credit rating and place many in financial hardship.
As an example, current figures indicate around 1.5 million Australians have a Buy Now Pay Later account – a significant level of growth over the last year, but according to ASIC’s analysis one in six BNPL consumers had either overdrawn, delayed repayments or been forced to borrow additional money because of a BNPL arrangement.
Responsible Leasing Australia (RLA) believes it imperative to ensure these types of financial products are offered safely to consumers, so they aren’t exposed to financial hardships, and we work to ensure industry participants establish and operate in the best regulatory framework.
The government is working towards this and whilst it is reassuring to know the government is working to protect consumers, learning and understanding how to look after your financial health is essential. It ensures that when you are looking to get the things you want, you still protect your financial stability and safety.
As with any financial transaction, be cautious and do your homework.
We recommend that consumers only deal with licensed credit companies that quote you the maximum amount you will be required to pay back. As part of that process, the company needs to take reasonable steps to verify your financial situation, requirements, and objectives for the loan and provide you with a copy of that financial assessment should you ask for it. They should also provide you with information about their credit and dispute resolution procedures, generally within a credit guide.
The lender must establish if you can afford the repayments or rental payments before approving credit.
Finally, while it can be challenging to determine which consumer credit products and companies are safer to work with, independent verification is available. RLA represents consumer leasing lenders and is working to bring a new sense of accountability. As more and more Australians seek to conserve their cash by choosing to lease essential household goods, consumers can be assured that RLA members adhere to a stringent Code of Conduct.
Key provisions of the Code include:
- Holding an Australian Credit Licence.
- Collecting a minimum of 90 days of bank transactions from applicants’ bank accounts and Centrelink statements where relevant.
- Imposing a cap of a consumer’s regular income for consumer lease payments.
Members must disclose the total price before consumers enter a consumer contract and work with consumers facing financial hardship to find equitable solutions.
For peace of mind please look for the RLA logo is an important first step towards securing a safer consumer lease. For more information on RLA, our Code of Conduct and information on our members, please visit www.rlal.org.au
Financial counselling is available without cost in all Australian states and territories – call the National Debt Helpline on 1800 007 007.
OPINION PIECE
Mark Thomas, CEO
Responsible Leasing Austalia
www.rlal.org.au
