The total repayments for the loans were $12,000 – close to 300 per cent above the retail value of the five items – but the woman ended up returning some of the items without completing the terms of the deal.

No Interest Loans Tasmania cited the case as an example of consumer leasing companies allegedly acting “unscrupulously” towards low-income individuals. It was detailed as part of a Senate inquiry into credit and financial services targeted at people at risk of financial hardship.

NILS found the woman had fortnightly repayments of $191 for the leases, a further $157 for payday loan repayments and $30 for collection agency repayments.

One of the items, a washing machine, retailed at $775 but could end up costing the woman $2392 under the deal.

NILS Tasmania executive officer Rick Tipping said these deals added a further financial impost on low income individuals compared to people who can afford to buy items upfront.

“We do know that this industry is expanding exponentially in response to the fact that people’s incomes are not keeping up with the cost of living. People can’t save, so they're turning to these deals,” he said.

Related: Tasmanian social support service holds concerns about payday loan debts

In the submission, Mr Tipping was highly critical of the conduct of the OzeRentals franchise, based in Ulverstone.

“It is difficult not to conclude that the company is not acting in the best interest of the client,” he said.

The submission drew a five-page response from Rick Anderson, managing director of OzeRentals in Northern Tasmania, who said the woman’s financial position was not as dire as NILS described, given NILS itself approved two further loans.

He said he had allowed the woman to exit parts of the arrangement without charge, and had driven himself over 400 kilometres to deliver, and then inspect and collect the returned items at his own cost.

Related: Fast loan machines a bad idea, Tasmanian financial counsellors say

Mr Anderson said the consumer leasing industry had “many variables” that cost businesses such as OzeRentals compared to pay day lenders.

“On occasions, customers surrender goods to us and I have replaced those items with ‘free’ items that I have sourced elsewhere,” he said.

“I have a shed, a van, a truck and employ two great staff. I have plans to be successful by offering a great service and an honest and fair product.”

Letisha desperately needed essential items for her household, but without enough income to generate savings, the Ravenswood mother-of-four only had one option.

“I decided to rent because I couldn’t save up enough for a fridge,” she said.

“The Centrelink pay is enough to manage week-to-week.

“I’m unable to save when you started looking at paying bills and all that.”

Letisha took out four rent-to-own deals with Rent4Keeps for a fridge, bed, phone and gaming console.

She said she was able to keep on top of the payments, and believed it was a good option to have essential items straight away. But Letisha encouraged people to look at no-interest loans first.

The inability to save is the main driver for people to take out rent-to-own contracts, Mr Tipping said.

Companies that offer the deals, such as Cash Converters, are required to complete budgets with applicants to determine if they can afford the repayments.

Mr Tipping said there were issues during this process however, and expenditure was often “grossly understated”.

In one example, a Tasmanian’s income was determined to be $692 per fortnight, when it was closer to $339. There was also no expenditure factored in for medical costs, despite the person being on a methadone program.

In other instances, such as one provided by Housing Choices Tasmania, consumer leasing companies actively contacted and encouraged people to take out further loans when their payments were close to completion.

The Senate inquiry into credit and financial services targeted at Australians at risk of financial hardship is due to release its recommendations in February.

It is examining whether regulation of payday lenders and consumer lease providers “meets community standards” and if reform is needed.