SUBJECTS: Australian Consumer Law, Unfair Contract Terms
MARIUS BENSON:
Christopher Bowen, there are a lot of people out there who are unhappy about bank charges at the moment, what are you going to be doing about it?
CHRIS BOWEN:
Well, what we are announcing today is that the unfair contracts law, which was agreed between the Commonwealth and the states last year, will be fast tracked. We think we can bring it in earlier than we originally thought, and we will be bringing it in on the first of January next year, the first of January 2010.
What that will mean is that where you have a standard form of contract - not one that is sat down and negotiated through - but one if you like, is a 'take it or leave' it type arrangement which is plonked on the customer's desk and told if you want this product this is what you have to sign.
If it is felt that one of those terms is unfair, that term can be struck out of the contract.
BENSON:
So as things stand at the moment, are there these 'take it or leave' it contracts that do include unfair provisions that will be struck out?
BOWEN:
Yes, there are a lot of concerns about some of the elements of these contracts and what the regulators will be interested in - both the ACCC and the state regulators will be able to deal with this - but what they will be interested in is terms that provide too much flexibility to one side at the expense of the other, terms which put all the risk of one side on the other, on the consumer usually, rather than the retailer or producer.
So terms that allow one party to make massive changes to prices or arrangements, or terms which allow one party to cancel the contract but there's big penalties if the other party chooses to cancel the contract - they would be the some of the terms that would be covered by new unfair contracts law.
BENSON:
One of the examples being given in reports this morning is a $35 charge for late credit card payments, would that sort of thing be considered too onerous?
BOWEN:
Look I can't get into the detail of the particular cases, obviously that would be a matter for the tribunals and the courts. But one of the things in the discussion paper I am releasing today, about some of the final details, is to say that there are some terms in contracts which are so onerous, so unfair, that they should just be banned outright as part of this law, and we are seeking feedback on what they are.
There is a discussion paper process out today, and I will be introducing the legislation into the parliament in the first six months of year, and having it operational by the first of January 2010.
BENSON:
Can you give us a slightly more specific sense of what onerous terms are being considered?
BOWEN:
Well as I say, there is a lot of concern about terms which provide all the flexibility one way, in which put all the risk on the consumer.
So when you have massive penalty fees for breaking a contract if you are a consumer; you are not allowed to break the contract if you have got to sign up for the full amount, but the other side - the retailer - can cancel at any time. They are things which cause concern.
There are other elements of course, the only exemptions from this are upfront prices, you won't be able to say that the price upfront is unfair, because you know about that upfront, as long as it is clearly communicated to you as a consumer, then that's covered. But any standard form contract, one which is not sat down and negotiated through, but which is plonked in front of you to sign, those terms will be up for review under the unfair contracts law.
BENSON:
As a rough example, say one of those 'take it or leave it' contracts said that there would a $38 charge for an overdrawn account that would be too much?
BOWEN:
That would certainly have the potential to be considered under this new law.
BENSON:
And just to clarify what you are not doing, what you are not dealing with an issue that was discussed yesterday, which is the charges that banks are imposing for using a foreign, another banks, ATM – that doesn't come under this?
BOWEN:
It would need to be a situation where the customer has no choice, it is simply a standard form that the customer has to sign up to. Anything under that is covered, we are not doing it because of the ATM rules of course, they are completely separate, but wherever you have hidden fees and charges or penalty fees or things like that, there would be the potential for the ACCC and other regulators to say 'well we think that is unfair' and to pursue that.
BENSON:
Chris Bowen, thank you very much.
BOWEN:
Great pleasure, anytime Marius.