CONSUMER LEASES

Page last updated on 01/06/2020

More information

What do the changes mean?


  • The approach with consumer leases must be to first check for irresponsible lending as it is a common problem
  • You can negotiate affordable repayment arrangements. Be aware that extending the term of the lease will mean the lease becomes even more expensive.
  • Waivers or reductions in debt should be available for people in significant long-term financial hardship. You will need to negotiate what will happen with the goods.
  • Stimulus payments and the coronavirus supplement should mean that some people can settle the consumer lease debt and buy the goods for a reduced amount as a full and final settlement offer. (Remember that in the consumer lease there is no “right to buy” but the lease providers will often agree to sell the goods)
  • You need to consider immediately cancelling the direct debit for any repayment arrangement your client can no longer afford. Talk to the consumer lease provider about different methods for making payments
  • Consumer leases may be a very low priority debt (depending on the attachment and need for the goods)




What do you do differently?


  • You should carefully check the lending for any consumer lease provided during the pandemic. It may be irresponsible. Particularly look for leases provided just after certain industries shut down
  • Do inform the consumer lease provider if your client has been financially affected by the COVID-19 pandemic
  • Do let the provider know if your client is receiving JobSeeker or JobKeeper payments
  • Take extra care with deferring payments as this will add to the costs of the lease by extending the term
  • Do check their website to see if the consumer lease provider is offering any specific assistance
  • Make sure you consider the following issues in your negotiations:
    • Late fees and default/legal fees not to be charged
    • Interest not to be charged
    • Repayments must be affordable
    • Where your client is in significant medium- to long-term financial hardship, a waiver or part waiver may be considered
    • Negotiate a debt reduction in full and final settlement if the client has funds and the settlement would help financial stability
    • Whether or not your client will own the leased goods and how this will happen
    • Ask for your client’s credit report to be marked as paid for the purposes of repayment history information (“0”) if a repayment arrangement is made (and your client keeps to it)
    • Ask for all enforcement to stop and that the consumer lease provider contact you before they start/re-start enforcement action.
  • Always ask that you and your client be clearly informed if the consumer lease provider intends to repossess the goods




Common problem: Goods repossession


  • It is hoped that there will be fewer repossessions because consumer lease providers will be concerned about the health of any repossession agents during the pandemic
  • If repossession is threatened, you or your client must immediately lodge a complaint in AFCA. Lodging a complaint in AFCA puts a stay on repossessions
  • Always use the lender’s internal dispute resolution process or AFCA to negotiate a workable repayment arrangement or run an irresponsible lending dispute
  • Negotiate to keep the goods (if the client wants to do this) in any settlement
  • Consider surrendering the goods and, and if the client qualifies, arranging a NILS for any essential goods




Resources


NILS




What has not changed?


  • You should always check if the lending for the consumer lease was irresponsible and run a dispute if it was
  • Consumer leases in default can still lead to the goods being repossessed and/or the debt being sent to a debt collection agency
  • Consumer lease providers can start legal proceedings to seek a court judgment for the debt (if it is in default)





Disclaimer: The information on this website is for financial counsellors only. It is general information only. Financial counsellors must still tailor advice to their client’s individual circumstances. 

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FCA sincerely thanks Kat Lane. Liz Minter and Melinda Rene for their outstanding work in putting this site together.