Klogg Changes advocated by the Paul Ali, Cosima McRae, Ian...

Klogg

Changes advocated by the Paul Ali, Cosima McRae, Ian Ramsay and Tiong Tjin Saw paper make sense, and should they be taken up, it would have no impact on TGA's revenue. I could be a a business positive if changes to the National Consumer Credit Protection Act eliminate bottom feeders from the sector, and an SP positive if they dissipate the current misplaced threat of legislative risk.

On the words ". . . advocates for the distinction to be removed for consumer leases which are in fact finance leases. These leases are characterised by being for much (if not all) of the expected useful life of the goods and for a value that is in excess of the goods' value.", I comment as follows:

• The NCCP Act is focussed on consumer credit, so words like “finance lease”, “credit contract” and others used below are restricted to natural persons to the exclusion of other legal personalities, and regulating contracts that are not consumer credit contracts is not the purpose of the Act.
• “Finance leases” are not defined by the NCCP Act, and the words used by Credit Suisse mean what the applicable Accounting Standards define as a finance lease, which in this context can be limited to the words underlined above, which suffice even if the contracts have no ownership transfer provisions.
• The NCCP Act for the most part defines consumer finance leases as “consumer credit contracts”, but it excludes finance leases classified as such pursuant to the underlined words above, and hence they escape regulation pursuant to the Act.
• “Consumer leases” means what the NCCP Act defines them to mean, and that is used to exclude them from being regulated by the Act. The definition does not include words to the effect of those underlined above, but it does require a lessee-right-to own condition, and consequently there is the loophole for so-called regulatory arbitrage – the crux of the problem.

Adding about two dozen words to the definition of “Consumer leases” to pull in the intent of the words underlined in the quote should suffice to fix the problem. Semantic confusion of having words like “lease”, “finance lease” and “consumer lease” (and their grammatical variations) used variously by the average person, the media, Senator Cameron, TGA itself, the accounting profession and the NCCP Act is unfortunate. Ideally, this confusion should be obviated, but we can live without that luxury.

TGA would be pleased to see such a change to the NCCP Act. What TGA is trying to avoid is having its genuine goods rental business damaged by sledge-hammer-to-walnut rectifications to the Act. People do genuinely rent some items for valid reasons – exercise equipment for the duration of a medical requirement is an obvious example. This is a minuscule component of TGA's business, so why Credit Suisse and others think TGA is materially at risk is strange – blame it on semantic confusion.

I used substantially earn my keep by wording contract amendments, so I may have a crack at developing the two dozen or so words required to amend the NCCP Act, and send them to TGA's new legal appointee to take to Government if he feels so inclined.