Submission: Early Termination Fees under Consumer Leases

Consumer Action welcomes the opportunity to comment on Treasury’s discussion paper on early termination fees under consumer leases. In this submission:

  • we welcome attempts to improve transparency and fairness in consumer lease termination fees, however these fees are symptom of larger, systemic problems with the regulatory structure of consumer leases. The only real solution will be to address those systemic problems;
  • we could support option one (the introduction of a formula to prescribe a maximum consumer lease termination fee) however the formula would be complex to design and would come with significant drawbacks;
  • we do not support option two, which would allow lessors to determine their own termination fee as long as it was a reasonable estimate of their loss;
  • we could support option three, which would deem a consumer lease to be a sale by instalments if the termination fee exceeded a certain percentage of the total cost of the contract. However, we believe the percentage would need be very low, perhaps around 10 per cent; and
  • argue that if Government chooses to regulate the amount that can be charged in early termination fees, the regulation needs to explicitly state that the law relating to penalties and unfair contract terms is not displaced by that regulation.

To read our full submission, click here: Early Termination Fees under Consumer Leases.

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