SUBJECTS: Australian Consumer Law, Unfair Contract Terms, Statutory warranties, lemon laws
LIBBI GORE:
Chris Bowen is on the line to discuss this with you this afternoon. Good afternoon Chris Bowen.
CHRIS BOWEN:
Good afternoon Libbi how are you?
GORE:
Well we are both doing the Tony Jones introduction now aren't we?
So come on Chris Bowen, tell me what was the impetus to the fast track these laws?
BOWEN:
We agreed with the states and territories last year to do that - to introduce these national laws - that is to say, we think we can do it a bit quicker, they were going to be in place until 2011, but the Commonwealth can bring in these laws sooner, which will provide those protections.
What we are looking at is contract terms which are in standard form contracts, so it is not when you sit down and negotiate on an equal level, but frankly when you get a contract plonked in front of you, if you want to buy this good or service, here it is sign right now and you don't get a chance to talk about it or negotiate it through and when you look at the fine detail, there are things that are really unfair and which waive your rights, and they will be able to be struck out as being unfair contract terms.
GORE:
Two things about what you said then Chris Bowen, number one is there ever a contract that is fair even if you do get to sit down and talk about it? Because not everybody is in an equal position when they negotiate.
BOWEN:
That's true, but when you do sit down and negotiate there is the capacity to talk about it and there is the capacity in most cases at the end of the day to walk away. What we're really trying to target here is where you don't have much choice and frankly most of the contracts are the same, or very similar between retailers, so if you want that good or service you really have to like it or lump it.
There may be elements that are not fair, elements of the contract which might say well the suppler can cancel at any time but you can't; or if you do try to get out we're going to punish you by a substantial fee; or we might have other contracts which say even if we don't supply the good or service which you still have to pay for it; they are very rare, but they do exist. We need to have that in place to say they can be struck out.
GORE:
Chris Bowen tell me how this will apply to banks, because we do like hearing how these sorts of things apply to banks.
BOWEN:
Banks and financial services will be covered
GORE:
Bank or credit card payments?
BOWEN:
All those things have the potential to come under the regime. Unfair contracts has been a law in Great Britain for a long time and recently the Privy Council – the equivalent of the High Court if you like - has determined that it does apply to them, and it would similarly apply here. Now I can't pre-empt what the regulators will say, what the ACCC or ASIC will say, or what the courts will say. But clearly where you have got a contract which says there are heavy penalty fees, much in excess of the cost that would be, imposed on that business by that action, but really it is about exacting extra juice from a customer, that would be the sort of thing which would bring the attention of the regulators under this new law.
GORE:
I note that the new provision will allow the consumer group Choice to ask for investigations into the fees, this is the second such a relationship that you have gone into with Choice Magazines; they are setting up the Grocerychoice website for you as well.
BOWEN:
Well it is not just Choice, what we have said is any consumer group will be able to approach the regulator on behalf of consumers about these terms and bring the regulator's attention, and there will be a formal mechanism by which they can do that. Choice, and here in Victoria the Consumer Action Law Centre, are very good advocates for consumers and they warmly welcome the reforms and have been calling for them for years.
GORE:
They have, and I am thrilled that you have got them to pip banks and mobile phone carriers - if they are covered?
BOWEN:
Yes they are. If you look at the areas that come up again and again and I'm not interested in targeting any particular business or sector, this applies across the economy, but the areas that come up for public concern, again and again, are banks, hire and rental cars, gymnasiums and telephone companies. These are the sort of things that people complain to me about all the time and look there are some good operators but there are some shonky operators, but this will apply to everybody.
GORE:
So tell me Chris Bowen, what will be the process, once the law is enacted, what will be the process for the new consumer watchdog, how will it work?
BOWEN:
Well the process will be that a consumer or a consumers group can go to the regulator, in most instances the ACCC, in some instances ASIC, and say look we signed a contract but we think the thing is unfair, the regulator will then look at it, they will then go to the company concerned and say we agree - if they do - this is unfair and we will take you on in court.
The experience is that in most instances, many instances, the supplier will say look we don't really want to go to court; let's do a deal, let's take that term out, let's come up with a term that everyone is happy with instead, and the consumer gets pretty quick relief.
That's the case, and it has been in Victoria and the UK, and we want to extend it across the country.
GORE:
What about cars, lemon laws?
BOWEN:
Lemon laws are a slightly different, that is something that the Victorian Government has raised with me, and through the Ministerial Council we are having a good look at that. Also statutory implied warranties - a lot of people don't realise that there actually is a warranty often over and above - what the manufacturer tells you about.
When you buy, they may say the guarantee is good for one year or two years, there is actually a law that the goods have got to be operating for its natural life and within the review of those laws at the moment, to make sure they are clear and working because many people don't know about them and don't understand them, many people buy extended warranties, when in fact they don't need to because they are already covered and lemon laws are already tied up in review.
GORE:
Just finally Chris, this system is it going to be streamlined or is it going to be cumbersome so in actual fact it is just too hard to negotiate your way through it?
BOWEN:
No, we will make this as streamlined as humanly possible, and importantly part of the reform at the moment is effectively nine consumer affairs laws - every state and territory has got one, there is a national one - and they are not all the same and you get different rights depending on where you live in the country. It's a compliance burden for business, we're getting rid of all that. While one law across the country is as simple as possible.
GORE:
Assistant Treasurer Chris Bowen is with you on the radio today, we are talking about some new laws that are going to come into play, allowing consumers to take action against contract terms that are unfair.
One final question and it has come up time and time again on this program Chris, break fees on mortgages; especially in this time of falling interest rates people are finding $20,000, $30,000, $40,000 to get out of these things.
BOWEN:
Yes, look again, the same rules apply there will be the potential for the regulators to look at those and say that they believe they are unfair and pursue them. Again I can't pre-empt what the regulators will say, or the courts will say, about particular instances, but there will be the potential to take those sorts of matters on.
There are the potential the something is to be regarded as so unfair that the Act will say so, and the Minister, myself or my successors, will be able to designate some things as being so unfair. But in the majority of instances it will be up to the regulator to decide whether to take them on or not.
GORE:
Does unfair have a legal definition, or a social definition, does it take into the context the economic climate?
BOWEN:
Unfair does have a legal definition and it will no doubt be tested in coming years as a result of these reforms and look it really comes down to what a reasonable person or a judge says a reasonable person will regard as being unfair, with all the circumstances and all the context. It often has regard to the power of the company and the power of the consumer and the imbalance and all that gets taken into account.
GORE:
Thank you so much Assistant Treasurer Chris Bowen.
BOWEN:
Always a pleasure.