Moves to allow new 'bond guarantee' products in the ACT could create a new version of 'pay day loans' affecting vulnerable Canberrans, a Greens MLA has warned.
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Despite the warning on the products, all territory political parties backed legislation on Tuesday to allow the guarantees to be offered in the ACT.
The products would allow landlords and tenants to use a third company that will 'guarantee' a bond would be paid to the landlord, with renters able to delay 90 per cent of the bond until the end of a tenancy.
But the ACT's Tenants Union has previously warned the products could mean renters on low incomes could be left facing debt collectors at the end of a tenancy and landlords could impose the guarantees on renters.
Greens MLA Caroline Le Couteur said while she was pleased at the move to regulate such products, there was "a significant risk that they may become very much like the pay day loan scheme" and end up something "not in fact in the long-term interests of renters".
Such schemes have been widely criticised for allowing some companies to loan small amounts to low-income people with contracts with unclear terms or unusually high interest rates.
"If if does end up like the pay day loan scheme it could well be an example of private operators potentially exploiting the vulnerable," she said.
Attorney-General Gordon Ramsay said the change was to foster innovation, and the products were "relatively untested in the Australian market".
But he also said the government still did not know the impact these products would have on the community, or 'consequences may flow' from allowing the products in the ACT, despite having worked on the issue since at least July this year.
Mr Ramsay said tenants would also receive a $100 grant to help with tenancy costs, and landlords could only use standard contracts under specific terms approved by the territory's Commissioner for Fair Trading.
But those specifics have not been included in the legislation passed, instead being subject to talks with the tenants sector and companies offering the product.
Mr Ramsay also said any company offering such guarantees would be able to charge tenants interest on overdue payments and involve debt collectors for such money.
He said the products essentially involved a three way contract between landlords, tenants and the guarantee provider and those providers would need to give other parties information about their rights and responsibilities under the contracts.
He said he expected the specific details of what contracts could be offered under the new laws should be confirmed after consultations over the next six months.
Opposition housing spokesman Mark Parton said the legislation appeared to be an "emergency measure while the government catches its breath" and decides how to actually regulate the new products.
He also said the regulations should ensure that if it was to provide a genuine alternative to bonds, costs for the companies should not be a disincentive.
