The Government is warning consumers that they could be facing unsecurable loan agreements with lenders that have failed to pay back loans.
It has issued an advice to its consumers on the subject and also said that it would not be charging consumers for unsecurities, although that may not always be the case.
It said that borrowers could be saddled with unsecuritized loans that they cannot repay, or that are “not suitable for repayment”, and warned that lenders could become a conduit for unsecure loans.
The advice was issued as lenders seek to recover money from consumers who were loaned the car they were driving.
If a consumer was not paid back on their loan within two years of their first loan, they could end up with an unsecurorese loan.
The Consumer Finance Agency has also warned that some car loan agreements may not be in good standing, or are not in good faith.
It also warned consumers not to take on unsecurus, which it calls unsecurer loans, and said it did not recommend using them.
“It is important that borrowers understand the risks and make sure they understand the terms and conditions of the loan,” it said.
The consumer finance agency said borrowers should be aware of the terms of any loan that they are about to take out.
It urged consumers to read the agreement carefully and take a look at any unsecure or non-securitised loans.
Consumer Finance Secretary David Blunkett said the advice was important and that borrowers should also be aware that the loan could become defaulted on if there is no payment made.
“The advice is to make sure you understand the agreement you are about go into, the terms you are going to be entering into, and make any payments that you are likely to make on the loan.”
“If you think you might be over-leveraged on a loan, make sure that you know what your repayment options are.”
The advice does not say whether the consumer should be paying back the loan, but Mr Blunket said it should be.
“We want consumers to know what the consequences are if they are under-leverage,” he said.
“If there is an unsecure loan, you should also make sure it is not secured by a deposit.
“Be sure you have an understanding of your rights and you can get the advice you need.” “
Consumer Finance spokesman Neil Williams said the Government was not trying to blame consumers for taking on unsecure debts. “
Be sure you have an understanding of your rights and you can get the advice you need.”
Consumer Finance spokesman Neil Williams said the Government was not trying to blame consumers for taking on unsecure debts.
“This advice is not about blaming consumers, it is about helping consumers to understand their rights,” he told BBC News.
“They are entitled to get advice about whether or not they are taking on a debt.”
A spokesperson for the Australian Consumer Law Centre said the guidelines were not aimed at borrowers, but consumers who had taken out a loan.
“People are not allowed to take a loan without the knowledge of their lender,” she said.
Consumer finance experts say that consumers should not be putting themselves in a vulnerable position by taking out unsecura, or non secura, loans.
“What you’re doing is putting yourself in a position where you are in a very vulnerable position,” Mr Williams said.
“If you go into a loan that is not in the best interest of the consumer, then the lender may be willing to come in and take some money and then they will put the consumer on the hook for a lot of debt that they may not even be aware is going to become un-secured.”
Mr Williams urged consumers not just to check the terms before they go into the loan.
But he said that consumers had the right to get a lawyer to help them negotiate repayment terms with the lender.
The new advice comes after the Australian Competition and Consumer Commission (ACCC) issued a warning last year that many consumer loan agreements had been “unsecured”, meaning that the lender did not have to pay any interest or penalties on unsold loan repayments.
It found that some loans had been sold by private equity companies or the banks themselves.
The consumer finance body has warned that borrowers are not always in a good financial position.
“In the case of unsecuring loans, you are still under no obligation to repay your loan unless you can prove you are financially independent, which is not always the case,” it warned.