4 May 2017: Introduction to Consumer Credit

On Thursday 4 May 2017, volunteer paralegal Milica Jankovic spoke on Noongar Radio and provided an overview of the current consumer credit landscape and common issues that arise on CCLSWA’s telephone advice line.

The Drive presenter, Jeff Michael asked Milica:

What is Consumer Credit?

When we talk about “Consumer Credit” we talk about all credit products that directly affect individual consumers (people) and their day-to-day lives. The most common types of consumer credit that people deal with every day include credit cards, home loans, car loans, personal loans, payday loans and consumer leases.

What common issues to consumers face?

One of the most common problems Consumer Credit Legal Service WA sees is what’s called “Financial Hardship”. Financial hardship is the position you are in if you are having difficulty making repayments on your loan or credit card.

If you are in financial hardship, the worst thing you can do is ignore it. The first thing you may do is contact your bank and tell them. You can often negotiate lower repayments for a period of time to help you get back on track

What about issues related to Credit Cards?

Credit Cards are one of the most common types of credit, but they can also be difficult to understand, and are really easy to get into trouble with.

Common pitfalls with credit cards:

  • Cash Advances: This means using your credit card to withdraw cash. You should avoid this where possible, as you get charged higher interest and fees than on purchases.
  • Multiple credit cards: Having multiple cards means that you’re paying multiple fees.
  • Unusual transactions: You should check your statement regularly for unusual transactions. There are strict time limits within which you can dispute an unusual or unauthorised transaction on your credit card statement, so it’s important that you check your statements.
  • Pay on time: If you pay on time you will avoid paying extra fees and interest.
  • Minimum Amount: If you can, you should pay more than the minimum amount. If you do this, you can pay off the card earlier, and pay less interest. So the total interest repaid overall will be lower.

What is payday loan?

These are loans for less than $2000, that are repaid within sixteen days to a year. You might have seen these advertised on TV.

The issue with these loans is that they often charge large fees and because of this loans can be difficult to pay back.

The other common problem with payday loans is that the loans often “rollover”. This happens if you do not pay off the loan by the final due date, and the lender “rolls” the loan over into a new loan. This puts people in what we call a “debt spiral”. This happens when your loan keeps getting rolled over into a new loan because you aren’t able to pay the loan in full when it is due.  This makes it very difficult to pay off. The debt keeps getting bigger and bigger.

 

Where can I go for more information on some of these common consumer credit issues?

ASIC has a campaign to provide information to Indigenous consumers on how to avoid common financial mistakes. Working with an Indigenous creative agency, ASIC released three animated videos that combine humour and financial tips.

The campaign is called “Take a minute with your money”. The videos are on 3 separate topics.

The first one looks at consumer leases, that is, when you rent goods and appliances. This also includes getting a NILS loan.

The second one looks at buying a car, and how to get the best deal on a car and on your related car loan; and the last one looks at store accounts and tabs, commonly known as “book up”.

These videos can be found on ASIC’s Money Smart website: https://www.moneysmart.gov.au/life-events-and-you/indigenous and the Money Smart YouTube channel.

More information is also available on our website at www.cclswa.org.au. Our website has a range of factsheets and sample letters that you can use.

If you can’t find what you are looking for on our website or would prefer to talk to someone, you can call our telephone advice line on 9221 7066.

What other community legal education activities does Consumer Credit Legal Service WA offer?

If you’re involved in a community group or school, Consumer Credit Legal Service WA can visit and deliver legal education sessions at your school or community group. Theses session may cover some of the things I have discussed above.  Sessions are often free or very low cost. If you are interested in CCLSWA providing you with a legal education session please send us a message via our website.

 

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