Consumer leases

 

Consumer leases are regulated under part 11 of the National Credit Code (NCC).

A “consumer lease” is defined in the NCC as a contract for the hire of goods by a person for a specified time at a specified rental under which they have no right or obligation to purchase the goods (s 169 NCC). If the lease contains an option or right to purchase the goods, it may be a “sale by instalments” agreement under section 9 of the NCC, and thus, potentially, a regulated credit contract.

The NCC does not apply to a lease with a fixed period of four months or less, or a lease for an indefinite period (s 171(1) NCC). It will also not apply to goods hired by an employee in connection with their remuneration or other employee benefits (s 171(2) NCC).

Section 172 of the NCC provides that where a party claims that the NCC applies to a consumer lease, and that it was entered into for personal purposes, it is presumed to be so unless the contrary is established. This is consistent with the equivalent provisions of the NCC in respect of credit contracts. However, section 172 applies only to contracts entered into on or after 1 July 2010. For contracts entered into before 1 July 2010, section 150 of the Uniform Credit Code (“Old Code”) applies (item 3(3) sch 1 Transitional Act).

A consumer lease must be in writing and disclose, at a minimum, the following:

a description of the goods (s 174(1)(a) NCC);

the amount the lessee must pay before the goods are delivered (s 174(1)(b) NCC);

the amount of stamp duty and other government charges the lessee must pay (s 174(1)(c) NCC);

any charges additional to rental (s 174(1)(d) NCC);

the amounts and timing of rental payments (s 174(1)(e) NCC);

the number of rental payments and the total amount payable (s 174(1)(f) NCC);

the conditions on which the lessee may terminate the lease (s 174(1)(g) NCC); and

the liabilities of the lessee on termination of the lease (if any) (s 174(1)(h) NCC).

The lessee must get a copy of the lease together with a statement in the form prescribed by the NCCP Regulations explaining the lessee’s rights and obligations under the lease (form 17: information statement) within 14 days of entry into the lease (s 175 NCC).

For leases entered into after 1 March 2013, lessors are required to provide periodic statements (s 175C NCC) and an “end of lease statement” in the prescribed form at least 90 days prior to a lease term ending (s 175H NCC).

Section 178 of the NCC requires that a lessor give a lessee 30 days written notice before repossessing leased goods. However, this rule does not apply:

at the end of the term of the lease (s 178(2)(a) NCC);

if the lessor believes on reasonable grounds that the lessee has or will dispose of the goods in breach of the lease (s 178(2)(b) NCC);

where the lessor cannot find the lessee after making reasonable efforts (s 178(2)(c) NCC);

if the lessee is insolvent (s 178(2)(d) NCC); or

if the court allows the lessor to do otherwise (s 178(2)(e) NCC).

Section 178A of the NCC allows the lessee to terminate a consumer lease, by written notice, prior to the leased goods being provided.

The Consumer Credit Legislation Amendment (Enhancements) Act 2012 (“Enhancements Act”) inserted new provisions into the NCC which cover lease variations by agreement (s 177A NCC), hardship variations (s 177B NCC), reopening unjust contracts (s 177F NCC) and enforcement (s 179D NCC) in relation to consumer leases entered into after 1 March 2013. These provisions largely mirror those that apply to credit contracts and consumer leases entered into before 1 March 2013 to which the NCCPA applies.


WARNING

Some traders, car dealers, finance brokers and lenders sign consumers up for consumer lease when in fact the consumers intend to enter into a “rent to buy” (sale by instalments) agreement or loan contract. A consumer who enters into a lease in such circumstances should obtain advice about whether they can seek to have the transaction reopened as unjust (seeUnjust contracts”).


Responsible lending obligations

Lessors are required to comply with provisions that are largely equivalent to the responsible lending provisions imposed upon credit providers (seeResponsible lending obligations: suitability” in Understanding credit and finance). These are set out in part 3–4 of the National Consumer Credit Protection Act 2009 (Cth) (“NCCPA”).