Book up is an informal credit scheme for purchasing goods or services. While similar, book up is an informal version of delayed payment schemes. It’s often used by stores, hawkers, taxi drivers and regional airlines. For example, running a bar tab, buying with store credit or promising to pay back the cost later are forms of book up.
When Is Book Up Used?
Book up is useful when you can’t pay for something immediately or when it’s convenient to use store credit. But people who don’t have access to banking services rely on book up to buy goods and services. As a result, book up is often the only way for people in remote and regional areas to manage their money.
What Laws Govern Book Up?
The National Credit Code applies to credit given in a contract or business context. A credit provider must have a license except where providing low-cost short term credit, which is less than 62 days. A trader must also lend responsibly, follow ACL and not engage in ‘unconscionable conduct’.
When Can Book Up Go Wrong?
Many traders that use book up need a security to make sure they’re paid back. Securities can range from a deposit to handing over your credit card, often with your PIN number too. The latter is a form of income-related security which can cause a range of issues.
Australian Securities and Investments Commission v Kobelt
The High Court is currently looking into a store in Mintabie, South Australia, about its use of a book up system. The store had a book up system where customers had to hand over a debit card to their bank account, along with their PIN.
The owner had a ’50:50′ policy where they withdrew most or all funds in the bank account. Half the amount was to reduce the customer’s debt, whereas the owner held the other half ‘on trust’. The customers then had to return to the store to get cash or a sale order for another store. The owner often didn’t allow customers to have their whole 50%, telling them they could have “a little bit” or only “some” food or groceries. Most of the owner’s customers were Anangu people. They were impoverished, financially illiterate and dependent on social security.
The main issue before the High Court is if the owner’s conduct was ‘unconscionable’ under Section 12CB of the ASIC Act. The first judge who saw the case ruled that the scheme was unconscionable. However, the Full Court reversed the decision based on the historic and cultural use of book up schemes and the customer’s voluntary use of the scheme. This case highlights the complexity of the law in this area as well as the degree of control that income-related securities can give in a book up system.
Should I Use Book Up?
A book up scheme can be convenient when:
- you need a good or service and can’t pay right away; or
- you don’t have access to a banking service.
Book up transactions can be problematic and the law in this area is complex. Consider how much control you’re giving up if you enter into an agreement and be aware of the risks.
