Reforms Alert Consumer Lease Industry to Compliance Risk
ASIC’s review of consumer leases has found evidence of customer harm, with some providers at risk of breaching consumer protection laws. This is despite providers leaving the market following recent reforms.
We reviewed the consumer lease industry to evaluate their implementation of the reforms. We found a significant decline in the number and value of consumer leases, with many providers leaving the sector. Despite these changes in the market, almost 25% of consumer leases are in arrears, indicating the financial vulnerability of many Australians reliant on these arrangements.
Consumer lease providers obtain 80% of their repayments via Centrepay deductions. Proposed reforms to the Centrepay regime include removing consumer leases from it. If these reforms are implemented, more providers are likely to leave the sector.
Within this context, many providers are now moving to alternate credit products that can involve other risks for consumers. We have long held concerns about the detrimental impact of some of these products and will continue to monitor conduct across both the consumer lease and short-term credit markets. Where we consider there to be consumer harm, we will take action to hold providers to account. For example, on 22 May 2025 ASIC took action against Walker Stores for allegedly inflating the cost of household goods, avoiding a rate cap designed to protect consumers, and overcharging interest (25-082MR).
Consumer leases are contracts that allow a consumer to rent an item for a set period, typically making repayments weekly or fortnightly until the lease ends. What distinguishes a consumer lease from another credit contract is that the provider owns the item at the end of the lease, not the consumer. Consumer leases often impact financially vulnerable and disadvantaged consumers more severely. They have often been provided to Centrelink recipients, with repayments being deducted via Centrepay before a consumer can even access their funds for basic needs such as food.
In December 2022, the Financial Sector Reform Act 2022 introduced reforms to the National Consumer Credit Protection Act 2009 (National Credit Act). These reforms were implemented in response to concerns about harm to consumers due to the practices of consumer lease providers, highlighted in ASIC’s work over many years.
Some of the key reforms included:
In light of these reforms, we reviewed consumer lease providers to monitor compliance with the new obligations, understand shifts in products made within the sector and identify non-compliance.
We encourage all providers, not just those in our review, to consider the findings and better practices set out in this article. Providers should examine their current policies and procedures for consumer leases to ensure compliance with their legal obligations.
ASIC’s review revealed that:
Figure 1 sets out a snapshot of findings from the consumer lease industry review.
We observed that there is room for significant improvement in consumer lease providers’ compliance with the new obligations, particularly in relation to:
The review on consumer leases is part of ASIC’s continued focus on the sector:
Poor practice:
One provider exceeded the protected earnings amount by not considering a consumer’s existing consumer lease deductions. The provider had identified the commitment in the Centrelink records held on the consumer’s file, but did not appear to have included it in the calculation of the protected earnings amount.
Providers are not identifying whether consumers have existing leases with other providers and are not doing enough to ensure compliance with the protected earnings amount. Most providers are limiting their inquiries to a consumer’s Centrelink records and bank statements.
Better practice:
Providers should take all steps necessary to ensure that they have considered existing consumer leases. One provider takes the additional step of reviewing a consumer’s credit report and, if they locate a credit inquiry by another provider within the past 12 months, they contact the provider to confirm whether or not the lease is still current. This practice provides greater clarity of commitments and whether the protected earnings amount is being adhered to.
https://asic.gov.au/about-asic/news-centre/news-items/consumer-lease-industry-on-notice-for-potential-compliance-failures-following-reforms/