Over 90% of consumers do not understand credit contracts
More than 90 per cent of consumers do not understand important features in their contracts for home loans, credit cards, store cards and car loans, new research by the University of Queensland has revealed.
According to UQ’s TC Beirne School of Law, the study is the most intensive and comprehensive experimental research project into consumer credit disclosure ever carried out in Australia.
Paul O’Shea, the project’s chief investigator, said consumer comprehension tests had indicated that, after reading contract documents for credit transactions, important questions such as the cost of credit remained difficult for consumers to understand.
The trend suggests Australians should carefully compare credit cards and other loan products before agreeing to any conditions.
"When consumers enter into a loan contract, they receive a bundle of documents," Mr O’Shea said.
"In our focus groups, 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," he added.
Meanwhile, card market analyst Mike Ebstein, principal of MWE Consulting, told the Sydney Morning Herald last week that debit cards are becoming increasingly popular among Australian shoppers as they look to control their spending.
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