Funeral Insurance is, for most Australians, a product that has little value. If you live for 5-10 years after you take out the policy, you might actually pay more than the benefit sum. And if you can no longer afford to pay the premiums and you have to stop, you generally will not get your premiums back - it’s simply money down the drain.
Known as “Rent-Try-Buy”, consumer leases are subject to considerably lighter regulation than credit contracts, a practice that should end. They are also incredibly expensive, and targeted at low-income and Centrelink dependent Australians. ASIC last year released a report on consumer leases, which found one lease provider charging the equivalent of 884% on the standard retail cost for a clothes dryer.
The recent Senate Inquiry into credit cards found that too many Australians are trapped by long-term credit card debt. Almost half the callers to our financial counselling hotline with credit card debt have debts more than $10,000, and one in 10 have more than $50,000. An average one person a week reports debt exceeding $100,000 and usually juggles at least 5 cards.
Payday lenders enjoy an exclusion from the cap on interest and fees in the National Credit Act that is applied to finance greater than $5,000. While payday loans are regulated in terms of the interest and fees charged, these loans can attract comparison interest rates between 112% and 407%. These high costs trap Australians into an ongoing debt cycle, perpetuating hardship.