Consumer credit confusion

JUNE 2010

A RECENT study has shown Australian lenders need to summarise contracts more clearly for customers, with 90 per cent of consumers confused by credit contracts.

The University of Queensland’s TC Beirne School of Law carried out the most comprehensive research project into consumer credit disclosure in Australia’s history, headed up by Paul O’Shea.

The test involved more than 220 comprehension tests, 55-people in-focus groups and 70 cognitive interviews.

“The results were used to redesign the requirements for consumer credit pre-contractual disclosure and help make contracts easier for consumers to understand,” says O’Shea.

“Consumers expressed high levels of dissatisfaction with current pre-contractual disclosure and wanted documents which were easier to understand and summarised concisely the information they needed to make informed choices about consumer credit products.”

O’Shea says the current Consumer Credit Code requires certain information about the transaction is included in a financial table at the start of the contract, yet for many the actual cost of credit is often difficult to understand.

As of July 1 the regulation of consumer credit is controlled by the Commonwealth instead of the states.