The Government has released the Final Report of the independent Review of Small Amount Credit Contracts (SACCs) for consultation.

The Report makes 10 recommendations about SACCs, 8 recommendations relating to consumer leases of household goods and 6 combined recommendations.

Additionally the Government is now also consulting on whether the recommendations relating to consumer leases should apply to all regulated consumer leases (including motor vehicles) rather than only leases of household goods, including electronic goods, and how second hand goods should be treated.

Small Amount Credit Contracts
The recommendations for SACCs include:

• Extend the protected earnings amount regulation to cover SACCs provided to all consumers.
• Reduce the cap on the total amount of all SACC repayments (including under the proposed SACC) from 20 per cent of the consumer’s gross income to 10 per cent of the consumer’s net (that is, after tax) income.
• Direct debit fees should be incorporated into the existing SACC fee cap.
• A national database of SACCs should not be introduced at this stage. The major banks should be encouraged to participate in the comprehensive credit reporting regime at the earliest date.
• No 4 per cent monthly fee can be charged for a month after the SACC is discharged by its early repayment.
• SACC providers should be prevented from making unsolicited SACC offers to current or previous consumers.
• SACC providers should not receive a payment or any other benefit for a referral made to another SACC provider.
• SACC providers should only be permitted to charge a default fee that represents their actual costs arising from a consumer defaulting on a SACC up to a maximum of $10 per week.

Consumer leases of household goods
The review has recommended there be a cap on the total amount of the payments to be made under a consumer lease of household goods. The cap would be a multiple of the Base Price of the goods (usually the recommended retail price), determined by adding 4 per cent of the Base Price for each whole month of the lease term to the amount of the Base Price. For a lease with a term of greater than 48 months, the term should be deemed to be 48 months for the purposes of the calculation of the cap.

The Report does not define the Base Price for second hand goods.

The cost (if any) of add-on services and features, apart from delivery, should be included in the cap. A separate one-off delivery fee should be permitted.

The other recommendations for consumer leases of household goods include:

• A protected earnings amount requirement be introduced for leases of household goods, whereby lessors cannot require consumers to pay more than 10 per cent of their net income in rental payments under consumer leases of household goods, so that the total amount of all rental payments (including under the proposed lease) cannot exceed 10 per cent of their net income in each payment period.
• There should be a prohibition on the unsolicited selling of consumer leases of household goods, addressing current unfair practices used to market these goods.

The combined recommendations relate to assessment, disclosure and warnings.