If you are in the business of leasing goods to consumers for their personal or household use, you may have to comply with credit laws.
If you are in the business of leasing goods to consumers for their personal or household use under a consumer lease you will have to comply with rules about disclosure, termination payments and insurance. You should also make sure that your lease is not oppressive.
Some leases are treated as consumer credit contracts and, if you offer these types of leases, you will need to comply with the rules relating to consumer credit contracts.
What is a consumer lease?
A consumer lease is a lease contract where someone (a lessee) is leasing goods for personal use and either has an option to purchase the leased goods, or the term of the lease is over 1 year.
When will a consumer lease be treated as a consumer credit contract?
Even if the term of the lease is less than a year and even if you don't give the consumer the option to buy the goods you may have to comply with credit laws. Leases are treated as a consumer credit contracts:
the total payments the lessee has to make under the lease is roughly the same (or more than) the cash price of the leased goods, or
the lessee has an option to buy the goods for nothing extra, a nominal amount, or well below what they’re worth at the end of the lease.
When working out the total payments a lessee has to make under a lease, the cost of optional services (like insurance), the additional payment to purchase at the end of the lease, and any amount due if the lease is cancelled, are not included.
What rules apply to consumer leases?
If you enter into a consumer lease, you must give the lessee key information about the terms of the lease:
at the start of the lease
if you agree with the lessee to change the terms of the lease
If a lessee cancels the consumer lease before the end of its term, you may charge them a reasonable estimate of what you will lose as a result of the lease being cancelled.
Credit-related insurance, extended warranties and repayment waivers
You can’t unreasonably require a lessee to take out credit-related insurance, an extended warranty or repayment waiver in connection with a consumer lease.
If the lessee does purchase one of these services in connection with a consumer lease, and it is arranged by you, then you must provide a copy of the terms of the insurance, warranty or waiver within 15 working days of when the cover is arranged.
Read more about credit related insurance, extended warranties and repayment waivers.
The CCCF Act gives lessees protection from what it calls “oppressive” consumer leases and from oppressive behaviour by lessors.