SUBJECTS: Australian Consumer Law, Unfair Contract Terms
LOUISE MAHER:
Got a contract you can't get out of? Maybe with a mobile phone company or a gym? Have you ever been slugged what you think is an unfair charge for going over your credit card limit, or overdrawing your account? The Federal Government is introducing a national consumer law and giving your more protection.
Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, Chris Bowen joins us to explain. Good afternoon to you Minister.
CHRIS BOWEN:
Good afternoon Louise, how are you?
MAHER:
I'm well thanks. How ill this new law work?
BOWEN:
Well what it will means is, that where you have a standard-form contract – so a contract that is not negotiated between the parties, it's if you like, plonked on the table for you to sign it – the regulators, in most instances the ACCC, will be able to seek to have any unfair terms struck out. Now what will 'unfair term' mean? It will have reference to the negotiating powers of the parties, and also, what we are particularly interested in, is elements of a contract which put all the onus on the consumer…
MAHER:
Give us an example of that?
BOWEN:
Where you have clauses in a contract where a consumer is unable to cancel a contract but the supplier is; or where there are very heavy penalties for cancelling a contract; where the supplier is able to increase the price without reference to the consumer – so you get some contracts where the upfront price is fine. But the supplier is able to increase prices as they see fit; or some contracts even seek to limit the legal redress of the consumer to say 'well the consumer will not be able to bring legal action if a good is not supplied, et cetera. So they are the sorts of contract terms that are unfair, and will have the capacity to be struck out with this new law.
MAHER:
So this law won't struck out those things but will allow the consumer regulator to take a look and to strike them out if it thinks it is necessary?
BOWEN:
There are a couple of elements to that. Potentially, some terms, which are so unfair that under the Act, the Minister will be able to say, these terms are always unfair and should be out. There will be another part of it where the ACCC will be able to commence court action to have a term struck out. So this has been in operation in Victoria for some years and the evidence is that it has been very successful, because what you find is, in that case, it is called Consumer Affairs Victoria; it goes to a firm and says 'we think is really unfair and we are going to take you on it court', well you find most suppliers say 'oh, we aren't interested in a court case, we will drop it, we will change it, what do you want us to do?' So consumers get quite quick remedies, and importantly, future consumers don't have to put up with the unfair terms at all.
MAHER:
So you are taking legislation which has applied in Victoria and making it apply right across the country? So all of the States and Territories have agreed?
BOWEN:
Yes, we are modelling it on the Victoria system though there are some changes, and what we have announced today, is that it will be in place from 1 January 2010. We did have previously, and the States and Territories have agreed, and that they would apply the Commonwealth law from 2011. But there is no reason to wait, to give these powers to the Commonwealth and it apply to all corporations, and hopefully, all State and Territories will pass application laws at various points across the year. But nonetheless, from 1 January 2010, there will be, subject to the wishes of both houses of parliament, these contract laws in place.
MAHER:
How will the law apply to bank charges?
BOWEN:
Well, it will apply to all financial service providers; it will apply across the economy, so across the board. The changes we make to the Trade Practices Act will be reflected in the Act that governs banks and financial institutions, so therefore, the same mechanisms apply. The only difference will be, that in most instances, ASIC would be the regulator, not the ACCC.
MAHER:
But who will decide, that for example, particular charges are fair or unreasonable? Someone is currently charged $35 for going over their credit card limit. Would that be considered unfair under this law?
BOWEN:
Well the regulator would be able to make that case in the relevant court or tribunal. In Great Britain, again, where these laws have been in place for some time, not too long ago, the Privy Council ruled that it is appropriate for those sorts of fees and charges to come under the unfair contract terms regulation. Again, this is potential, I can't pre-empt what the regulators do, etc, but there is the potential there for those sorts of actions to be taken.
MAHER:
So once this law is introduced at the start of next year, those bank charges could come under a fair bit of scrutiny?
BOWEN:
Well certainly, I would expect consumers to be looking towards regulators and consumer groups, who will be pursuing those sorts of elements. But I really want to get away from targeting one part of the economy. There are operators who come, quite regularly, for public scrutiny – banks are one, car rental companies are another, other are gyms – if you want to try and get out of the gym contract, to get transferred, let's say you have your work transferred somewhere else, and you have to pay penalty fees or cancel your contract, etc. They are the sorts of things that will be looked at under this kind of law.
MAHER:
Mobile phone companies as I mentioned at the start?
BOWEN:
Yes, they come under it and that is an area of some community concern. No doubt that will be tackled under this new law.
MAHER:
When you say 'some community concern', just how many complaints are received about what can be considered 'unfair contracts'?
BOWEN:
Look, I don't have a number in front of me, but if you looked across all of the regulators, you would be looking at, I would have thought, hundreds if not thousands over a year, of concerns if not complaints about elements of contracts that aren't fair. And consumers often don't realise until it comes up – you have a standard-form contract plopped in front of them, 'I want the mobile phone, I'll sign now' and when something goes wrong, you find that you don't have many rights at all.
MAHER:
The fact that you are letting us know about this now, with the law not coming in until 1 January next year, and that is, as you say, if it passes through both houses of parliament without amendment. There is also, as well as giving consumers notice about what is going to happen, it also gives companies time to look at their everyday contracts and just make sure that they are fair.
BOWEN:
That's 100% correct Louise. Some people have questions, 'well why does it take until January for the law to start?' Two points. It does take time to get legislation through the parliament these days. And secondly, it is better if you can give companies some warning that this is happening and give them a chance to look at their contracts themselves to say 'hmmm, in the cols light of day, that probably is unfair, we might as well take that out'.
MAHER:
And what happens in the meantime? We just have to wear it?
BOWEN:
Well, the law, as it is at the moment, doesn't provide these protections against unfair contract terms. Obviously, the ACCC does what it can and we would be seeking, that businesses look at the spirit of what we are trying to do and get their house in order before 1st January next year, where possible, but the enforcement of the new law won't start until then.
MAHER:
Minister, thank you very much for joining us.
BOWEN:
Pleased.