FAIR TRADING NSW: NEW DISCLOSURE OBLIGATIONS
Important changes to the Fair Trading Act 1987 (NSW) (Act) aimed at improving transparency have come into effect for businesses providing goods or services to consumers in New South Wales (NSW)
The Act requires that before a business provides goods or services to a consumer the business must take reasonable steps to ensure the consumer is aware of the substance and effect of any term or condition relating to the provision of the goods or services that may substantially prejudice the interests of the consumer.
Without limiting the kinds of terms and conditions that may be captured, the Act lists the following as terms and conditions that may be substantially prejudicial, terms that:
• exclude the liability of the business;
• provides that the consumer is liable for damage to goods that are delivered;
• permits the business to provide data about the consumer, or provided by the consumer, to a third party in a form that enables the third party to identify the consumer;
• requires the consumer to pay an exit fee, a balloon payment or other similar payment.
The Act also requires an intermediary who receives a financial incentive (for example, referral fees or commissions), to take reasonable steps to ensure the consumer who will be supplied with the goods or services in relation to the financial incentive is aware of the existence of the arrangement.
When does the change take effect and who must comply?
The changes came into effect from 1 July 2020 but due to a six-month grace period are enforceable from 1 January 2021.
The Act applies to businesses carrying on a business in NSW or incorporated or registered under a law of NSW and/or businesses delivering goods or providing services to a person ordinarily living in NSW or a person who is otherwise connected with NSW (meaning that if a business outside of NSW delivers goods or provides services to a person ordinarily living in NSW, then this Act must be complied with).
What can a business do to comply?
Identify existing terms and conditions that may substantially prejudice the interests of the consumer (examples provided in the Act include terms that exclude the liability of the business, terms that provides that the consumer is liable for damage to goods that are delivered, terms that permit the business to provide consumer data to a third party that enables them to identify the consumer, or terms that require the consumer to pay an exit fee, balloon payment or similar) and take reasonable steps to ensure that consumers are aware of the substance and effect of any such term or condition before the business supplies the goods or services.
NSW Fair Trading provides examples of what reasonable steps can be taken including the use of a plain English short summary on the front page of a contract, having the information appear on screen in a scrollable text box (online), providing information in short portions at appropriate points, or using illustrations to explain relevant information. Further, the best way to know whether reasonable steps have been taken is to check directly with the consumer to confirm (whether verbally, by initialing a contract, or by checking a box on a web-form for example) they are aware and understand the substance and effect of the key terms and conditions or the existence of any commission or referral arrangement.
Who is a consumer?
Consumer is defined in the Act to have the same meaning as the Australian Consumer Law (ACL). A person or business will be a consumer if they meet the ACL definition of consumer, for example, subject to any limitations, the cost of the good or service is the same or less than the threshold monetary amount (currently $40,000 and increasing to $100,000 on 1 July 2021), or if the good or service exceeds the monetary threshold, that the good or service is of a type ordinarily acquired for personal, domestic, or household use or consumption. Further information on changes to the ACL definition of consumer and a review of when a person or business will be a consumer will be provided in an upcoming article.
What are the penalties?
If the new requirements are not complied with a court may impose a penalty not exceeding $110,000 for a business and not exceeding $22,000 for an individual. NSW Fair Trading may issue a penalty notice in the amount of $1,100 for a business and $550 for an individual.
The key takeaways are:
• businesses must take reasonable steps to ensure the consumer is aware of the substance and effect of terms and conditions that are substantially prejudicial to the consumer’s interests before they purchase goods or services;
• an intermediary receiving a financial incentive must take reasonable steps to disclose the financial incentive before the consumer receives the goods or services.
• the requirements are enforceable from 1 January 2021;
• the requirements apply to businesses in NSW and/or businesses providing goods or services to persons living in, or otherwise connected with, NSW;
• businesses should review terms and conditions, take reasonable steps to ensure the consumer is aware of the substance and effect of terms and conditions that are substantially prejudicial to the consumer’s interests before they purchase goods or services or amend substantially prejudicial terms and conditions.
This document is intended for general information purposes only and should not be regarded as legal advice. Please contact Industry Legal Group if you require legal advice.
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