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Protecting the Most Vulnerable in Consumer Credit Transactions


There are two key ways in which the Australian Uniform Consumer Credit Code seeks to protect consumers in relation to consumer credit transactions. The first is by means of disclosure regulation where information is required to be disclosed to the consumer before the credit contract is entered into and the second is by way of “safety net” provisions, where contracts can be varied or set aside in the event of hardship, a finding that the transaction was unjust, or a finding of unconscionable fees or charges. This article explores the limitations of both of these means of protection, particularly in the case of vulnerable, low-income consumers. In order to highlight the inadequacies of these forms of consumer protection and the need for regulatory reform, we draw on interviews conducted with 30 low-income consumers who had recently signed a credit contract, focusing on their understanding of information disclosed in the contract, as well as their responses to hypothetical unfair terms and their understanding of their rights, for example in the event of an unjust transaction. These interviews were conducted as part of a joint research project between Brotherhood of St Laurence and Griffith University’s Centre for Credit and Consumer Law, funded by Consumer Affairs Victoria.

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  1. (1991) 22 NSWLR 1 at 20.

  2. Permanent Custodians Ltd v Upston [2007] NSWSC 223; BC200701913.

  3. See Director of Consumer Affairs v City Finance Loans [2005] VCAT 1989 (30 September 2005), para 31–32.

  4. Note, however, that the sample size for credit problems was 26.


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This research was funded by the Consumer Credit Fund, Victoria, Australia. We would also like to thank Samantha Robinson, Greta McDonald, and Greg Fisher for assisting with the recruitment of research participants and the anonymous reviewers for the helpful comments on this article. Most importantly, we would like to thank the 30 low-income people who participated in the research and openly shared their opinions. Their willingness to talk about their experiences with contracts and views of credit regulations has provided helpful insights.

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Correspondence to Therese Wilson.


Appendix 1: Discussion Guide—Views on Disclosure

  1. 1.

    How did you go with the paperwork? What did you think of it? Was it much different to other forms you have completed?

  2. 2.

    Are you interested in what your fortnightly repayment is? (If they do not give the specific repayment rate, prompt: “what do you think the repayment rate is?”)

  3. 3.

    What do you think about the length of time it will take you to repay the loan? (If they are not specific about the term, prompt: “how long do you think it will take?”)

  4. 4.

    What do you think about the cost of the loan? (If they do not mention interest, prompt—“what do you think about the interest rate”? If they are not specific, ask “what do you think the interest rate is?”) Apart from the interest payments, are there any other costs to the loan? What do you think they are? Do you know what the loan is costing you in total?

  5. 5.

    Did you realize that you are breaking this contract if you use the money loaned to you for something different to what is set out in this letter? What else do you think might be breaking this contract? (Once they answer—“what do you think would happen if you …. [their answer]?”)

  6. 6.

    Did you realize you have the right to make a complaint if the bank [or cooperative] makes a mistake? What other rights do you think you might have?

  7. 7.

    If you had any problems in making payments, who would you discuss this with?

  8. 8.

    What is the most important thing you have learnt from this paperwork?

  9. 9.

    What do you not like about the paperwork?

  10. 10.

    If you had a choice between this contract (point to summarized version of contract) and the one you have just signed, which would you prefer? Why?

  11. 11.

    How much of the paperwork did you read?

Appendix 2: Short-Form Personal Loan Contract

  1. 1.

    You are borrowing $ ……… to be advanced on ……….

  2. 2.

    You are being charged an annual interest rate of …..%, calculated each day, but payable as part of your fortnightly repayment of $..............

  3. 3.

    You will pay a loan approval fee of $.....

  4. 4.

    The terms of this loan may be varied by the lender without your consent.

  5. 5.

    If you fail to make a payment when it falls due, the lender will give you 30 Days to pay and will then be entitled to demand repayment of the full loan amount.

  6. 6.

    You will receive a statement from the lender every 6 Months and will need to pay between $3 and $14 for an additional statement should you require for it.

Note that loan size, date, interest rate, fortnightly repayment rate, and application fee completed by hand at the interview.

Appendix 3: Discussion Guide—Unfair Contract Terms

  1. 1.

    What did you think of the papers and the way [company name] does things?

  2. 2.

    What did you like about the way they do things?

  3. 3.

    Was there anything you did not like? [prompt: in the paperwork or in the process]. Was there anything you found difficult to understand? [If yes, prompt: Did you do or say anything about this?]

Here is a pretend contract. It includes some sentences which might be similar to the one you signed with [insert name of company they obtained finance from.] We are interested in what you think about this pretend contract and if you can remember, how you felt when you signed up with [company name].

  1. 4.

    Let us have a look at number 1 on this contract. It is likely that you had a similar clause in your contract with [company name]. What do you think of this? [Prompts: How would you have felt if [company name] changed the repayment rate without your okay? How would you feel if they changed the interest rate? Did you realize they could do that?]

  2. 5.

    Let us think about number 2 on the contract. What are your views on this? [Prompts: If [company name] asked you to repay the entire loan in one lump sum, how would you have felt? Did you realize they could do that?]

  3. 6.

    Let us have a look at number 3 on the contract. What do you think of this? [Prompts: How would you have felt if [company name] were able to take household goods like your bed or kitchen utensils if you did not repay the loan? Did you realize they could do that?]

  4. 7.

    Did you have any disagreement about the loan with [company name]? [If so, tell me a bit about what happened (try to get who they spoke to and why). If not, who would you discuss any difficulties with? (Try to get information on why they would go to this person).] Do you think you have any legal rights in working out any disagreements about the loan? Can you tell me a bit about what these rights might be?

Appendix 4: Mock Unfair Credit Contract

Credit contract

Between: Credit provider (“we”)

And: Borrower (“you”)

  1. 1.

    From time to time we may:

  2. (a)

    Change the amount of or basis for calculating any fee or charge, change the interest or fee charging cycle, or both, and, except during any fixed interest rate period of the loan, change any interest rate margin, any link to a reference interest rate, and the basis for calculating interest

  3. (b)

    Impose and debit to the loan account any new fee or charge

  4. (c)

    Change the frequency of repayments

  5. (d)

    Change the loan account number

  6. (e)

    Change the way we describe any reference interest rate

  7. (f)

    Change any other terms and conditions

  8. 2.

    In the event of default, we may terminate this agreement, require payment of all monies then due and owing under this agreement, and exercise our rights over security property provided by you in accordance with clause 13.

  9. 3.

    As continuing security for the payment of all of your debts, liabilities, and obligations to us, you grant a security interest to and in favour of us over all of your present or after acquired personal property and proceeds there from.

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Wilson, T., Howell, N. & Sheehan, G. Protecting the Most Vulnerable in Consumer Credit Transactions. J Consum Policy 32, 117–140 (2009).

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  • Consumer credit
  • Disclosure regulation
  • Safety net provisions
  • Low-income consumers