Consumer leases are regulated by the provisions of Part 11 of the NCC. Enhancements to the NCCPA were introduced in March 2013, including changes to the NCC which make a consumer lease more like a loan, notwithstanding that a consumer lease does not result in the consumer actually owning the goods at the end of the agreement. Under a consumer lease the person who owns the goods and gives the consumer the lease may be called the lessor; and the consumer who hires the goods may be called the lessee. We will use the terms lessor and lessee in this section.
A contract for the hire of goods by a person for a specified time at a specified rental is treated by the NCC as a "consumer lease". However, the NCC does not apply to leases for a fixed period of four months or less, or those for an indefinite period [s 171(1)].
Check the terms of any consumer lease agreement carefully, because although the agreement may say it is for an indefinite period, consumer lessees may be asked to nominate a fixed period, which potentially means that an unregulated lease could indeed be regulated. Companies who act as lessors who use these types of terms may be in breach of the NCCPA, for providing credit to a consumer without a licence.
Consumers may be attracted to hire common consumer goods such as computers, household white goods, televisions or sound systems on a consumer lease. Be careful because although monthly payments may seem low, a consumer may find that they pay many times the original purchase price of the goods at the end of the contract. In addition, the terms of a consumer lease may also make the consumer responsible if the goods are lost or stolen whilst being hired. It may be difficult to obtain insurance cover for hired goods, because standard household insurance policies generally exclude items that are not owned by the consumer.
Section 172 of the NCC, which deals with presumptions and declarations as to the purpose for which a consumer lease is entered into, has been updated from the old Credit Code in line with the modifications applied to the equivalent provisions of the NCC in respect of credit contracts.
Under section 174, a consumer lease must be in writing and disclose, at a minimum, the following:
- a description of the goods;
- amounts payable by the lessee prior to delivery;
- stamp duty and other government charges payable by the lessee;
- any charges additional to rental;
- the amounts and timing of rental payments;
- the number of rental payments and the total amount payable;
- the circumstances in which the lessee may terminate the lease; and
- the liabilities of the lessee on termination of the lease.
The lessee must get a copy of the lease within 14 days with an explanatory statement in the statutory form (Form 17 NCCPA Regulations) which sets out a consumer’s rights relation to the lease [s 175].
From March 2013, lessors are also required to give lessees periodic statements of account (not more than 12 months apart) which must include prescribed information as provided in r 105A:
- The lessee will not own the goods at the end of the lease; and
- The lessee does not have a right or obligation to purchase the goods at the end of the lease.
Regulation 105C provides that, at least 90 days before the end of the consumer lease, a lessee must be given a notice including the following information:
- The end date of the lease, and that the goods must be returned;
- Collection arrangements;
- Monthly liability if the goods are not returned; and
- Whether or not the lessor is prepared negotiate the sale of the goods and an estimate of the price.
Finally, s 177F now extends to lessees under a consumer lease the right to apply to a Court to re-open transactions on the grounds of injustice. The wording of ss 177F – 177K is largely similar to s 76 NCC, including the matters which the Court will take into account when looking at whether a lease contract is unjust.
Renting consumer goods is an expensive option, and lessees often end up paying well in excess of the original price after the entire contract is paid out. Other alternatives exist to assist with the purchase of consumer goods, including the No Interest Loans Scheme, and Centrelink advances. Visit the Money Smart website www.moneysmart.gov.au for more information about other options.
Under Part 3-4 of NCCPA (in particular, ss 151 - 155), a lessor under a consumer lease is required to comply with provisions that are largely equivalent to the responsible lending provisions imposed upon credit providers (see: "Responsible lending obligations", above). This includes carrying out an assessment (which must be provided to a lessee upon request) as to the unsuitability of the lease, including taking into account the lessee’s objectives.
The lessee has the same rights as a borrower to obtain a copy of the written assessment on request pursuant to s 132 NCCPA,.
The rules that apply to variation, reopening and enforcement of credit contracts apply, in general, to consumer leases. Under section 178, a lessee must be given 30 days notice of repossession except:
- at the end of the term of the lease;
- if the lessor believes on reasonable grounds that the lessee has or will dispose of the goods in breach of the lease;
- where the lessor cannot find the lessee after making reasonable efforts;
- if the lessee is insolvent; or
- if the court allows the lessor to do otherwise.
Many of the new provisions that commenced in March 2013 bring the rights of consumers who lease goods into line with the rights of borrowers under a credit contract.
Section 179A provides that a consumer is entitled to a written statement of the amount required to terminate a consumer lease, as well as certain other information, as long as the request by the consumer is in writing.
Warning: Some traders, car dealers, finance brokers and lenders sign people up for consumer leases when in fact the consumer intended to enter into a loan contract. It is crucial that consumers check a finance contract before signing to see if the goods will be owned at the end of the agreement. If a lease is entered into in such circumstances advice should be obtained about having the transaction reopened as unjust.
A Novated Lease is not covered by the NCC, by virtue of s 171 (2), which provides that it does not apply to goods hired by an employee in connection with their remuneration or other employee benefits.
A Novated lease is one under which an employee will lease (or more accurately, "hire purchase") a car from a seller, but the employer will be responsible for the lease repayments. The employer then deducts the repayments from the employee’s pre-tax income. Usually, a novated lease comes to an end when an employee ceases to work for the particular employer, in which case the employee is then liable for the lease payments. The lease may be assigned to another employer to tak over, but if the employee cannot find work, the car may have to be surrendered to the seller.
The lease may also come to an end when all payments are made, and the ownership of the vehicle then passes to the employee.
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