Protecting our Industry, Protecting our Consumers

By CHERPA

As most of our members will be aware, the election of the new Labor federal government is a matter of concern for our industry.

For the past eight years, CHERPA’s primary focus has been to lobby and work with government ministers so as to educate federal opinion makers about the reality of our industry, with the intent of creating favourable legislative and regulatory conditions for us all. 

Without exaggeration, it has been a hard slog; legislating the consumer rental industry is a surprisingly contentious issue, with the two major government parties so far holding significantly contrasting views as to how to approach the matter. With the Liberal government we were able to make at least some headway, with draft legislation ultimately reflecting some of our recommendations. We found that our position with respect to the value of our industry and its necessity as a provider of goods to vulnerable consumers, and as a facilitator of genuine financial inclusion, was largely accepted. We may not have agreed upon all matters, but at least we had developed a successful dialogue between us.

Now, unfortunately, it appears we must start all over again, this time with significantly less favourable winds. Although we have previously been fortunate enough to have a number of key discussions with party members who are now ministers, and have made some headway into forging good relationships, there is still an uphill battle to be had.

The main problem here, we believe, is still one of identity – the identity of our industry, who we are, and what we stand for. Regretfully, the ghost of past rogue operators still haunts the perceptions of those with whom we must now deal, and to extend a metaphor, it’s going to be difficult to exorcise.

The Labor Party sees itself as something of the people’s champion – the protector of the interests of everyday working Australians. What they struggle to comprehend is how an industry that ostensibly charges several times the value of the RRP of a given household item over the life of a lease contract can possibly, in fact, also have a consumer’s best interests at heart.

“How is this not exorbitant?” goes the question. “How is it not flagrantly ripping off vulnerable consumers, and lining the pockets of the corrupt?” This might seem like a blunt way to put it, but this is how the Consumer Advocacy industry largely portrays us, and indeed, as it stands they are the ones who have the larger portion of Labor’s ear.

Of course, this is an illusion, one that has unfortunately been bolstered by, as we mentioned, a handful of rogue operators who have succeeded in creating a media circus from time to time, causing havoc for our industry’s PR and requiring significant damage control.

Additionally, the Labor government is likely to presently conflate our industry with SACC lending, which, although shares some outwardly similar characteristics, is actually different in a number of critical respects.

To explain, we quote a brief segment from a recent submission by CHERPA to the former Liberal government regarding the draft industry legislation, including our clear distinction from SACC or PayDay loans:

“The error here is that of the clear ongoing utility provided by consumer leases, in comparison to SACC loans . . . “ (CHERPA Submission to Senate Standing Commitee on Economics, February 2020)

By “ongoing utility” we referred to the fact that a non-fixed-term lease agreement is a kind of service provision, where the consumer does not own the goods, unlike a fixed-term agreement which is treated as a credit contract on the value of the goods (essentially granting the consumer ownership from the time they receive it).

This being the case, the critical difference here is one of risk ownership, and ultimate responsibility for the goods. In the case of non-fixed term agreements, the lease company remains the risk owner, and shoulders ongoing responsibilities including servicing and repairing the goods, and even replacing where necessary (in the case of goods failure that is not the fault of the consumer). Moreover, as we all well know, there is significant risk ownership to be had in an industry-wide sense due to the proportion of clients that simply cease to pay, without returning the goods, and with few, if any, viable enforcement methods available. The reality of the industry is, with this kind of risk profile, the costs associated with non-fixed-term lease agreements are not only justified, they are essential for the industry’s survival.

Moreover, the industry also remains an essential service in many cases and for the majority of our clients, as the absence of service provision by our industry would lead tens, if not hundreds, of thousands of vulnerable Australian consumers down the path of financial exclusion, denying them access to the most basic of household goods – refrigerators, washing machines, and more.

This is a far cry from the notion that domestic rental companies are simply lining their pockets with customer money collected from excessive fees and charges. Nor are the majority of our members large corporate entities without a connection to the consumers whom we serve. It is this change in paradigm that is our challenge when presenting the true state of the industry to the government, though it’s a challenge we gladly take upon ourselves.

As we have repeatedly demonstrated, the consumer advocacy industry’s alternative plan of supplanting lease agreements with NILS (no-interest loans) to the majority of these vulnerable consumers is mathematically futile, with many billions of dollars of government funds required to make such a plan feasible. Under the current budgetary circumstances, and indeed under most federal budgets, this plan could not be considered realistic. Surely in that case, the only answer is provision by private commerce, as per our current industry.

What needs to be understood is that vulnerable consumers must walk a narrow path in order to be kept financially safe. It is not merely the threat of financial exploitation on the one side, but the very real risk of financial exclusion on the other. It is like driving on a winding mountain pass – you could go off the edge, but you could also run into the mountain. The only clear way is down the middle.

For our industry to remain viable, we will need to lobby hard to make our position heard. Specifically, we must avoid the threat of consumer lease agreements being lumped in with the legislative provisions of SACC lending. We must create genuine relationships with the new government ministers so as to be appropriately heard. We must have the opportunity to reverse the vilification of our industry, which we have suffered for years at the hands of ignorant and frankly vindictive false advocates. 

Through successful self-governance and the incorporation of an industry-wide Code of Practice, CHERPA hopes to distance our industry from the stain brought upon us by a handful of rogue operators, and continue to improve conditions for the industry generally.

We look forward to your ongoing support, are confident that with the necessary resources and correct approach, plus a healthy dose of persistence, we can bring about the changes needed to protect not only our industry but also the consumers who rely upon us.

CHERPA