Figures showing almost half of Radio Rentals’ $197 million revenue comes directly from Centrelink payments have led Good Shepherd Microfinance to call for a new “responsible referral framework” to be introduced into the consumer lease industry.
The proposal would see consumer lease providers, such as Radio Rentals, refer people on low incomes to no interest loans, rather than sign them up to contracts which see them pay around three times the standard retail price for essential items such as fridges, televisions, computers and washing machines.
Good Shepherd Microfinance CEO, Adam Mooney, said people on low incomes simply can’t afford to be paying three times market value for household goods.
“Goods rental companies usually advertise a weekly repayment rate which may seem affordable, but what they don’t tell you is that by the time the contract ends you’ll have paid about 300 per cent more than someone who bought the product outright,” he said.
“In dollar terms a consumer lease will see you pay around $1800 for a $650 fridge and will take three years to repay. It’s a stark contrast to our No Interest Loan Scheme, under which a $650 fridge costs just that – $650.”
Mr Mooney said Good Shepherd Microfinance had a strong track record of working with big business to help them understand the financial barriers for people on low incomes, and that he was willing to help the industry develop a framework which would see them refer eligible customers to the No Interest Loan Scheme (NILS).
“We know consumer lease providers need to make a dollar and we’re not looking to put them out of business. What we want to do is help them identify customers who meet the eligibility criteria for one of our no interest or low interest loans and facilitate a referral to our national provider network,” said Mr Mooney.
“Currently we’re seeing consumer lease providers targeting those on low incomes, and advertising to people on parenting payments, family tax benefits, disability support pension and widows allowances.
“This reliance on people on low incomes is unsustainable. It makes it hard for customers to afford day-to-day living expenses, and almost impossible for them to save for things that improve financial mobility such as training to enter the workforce or a car to get to work – in that way it’s bad for the nation.”
“We’ve seen responsible lending frameworks introduced in other sectors and we think it would be in everyone’s best interest for consumer lease providers to get on the front foot and implement some safeguards to protect people on low incomes,” said Mr Mooney.
Good Shepherd Microfinance would also like to see:
- CentrePay deductions prohibited for essential items that can be purchased through NILS;
- Legislative change to the Credit Act to bring consumer leases with a buy option to be subject to the same regulations and pricing caps as small amount credit contract; and
- Increased investment in inclusive finance as called for by the Murray Financial System Inquiry.
Good Shepherd Microfinance offers no interest loans with no fees to people on low incomes, through 669 community provider locations across Australia. The No Interest Loan Scheme (NILS) loans range from $300 to $1,200 for essential goods and services. In addition, Good Shepherd Microfinance offers a low interest loan called StepUP through its partnership with the National Australia Bank. People can borrow between $800-$3,000 at 5.99% per annum with up to three years to pay it back. More information at goodloans.org.au or phone 13 64 57.