Assistant Treasurer Chris Bowen has announced that the national consumer protection law which was agreed between the Commonwealth and the states last year (see here), will be fast tracked with a bill to be introduced by June 2009 and commencement on 1 January 2010.
Proposals for the law are outlined in a consultation paper (An Australian Consumer Law: Fair markets — Confident consumers). Submissions on the Australian Consumer Law are due by the 17th March 2009.
The consultation paper follows recommendations from a Productivity Commission review that there be a new consumer policy framework, comprising a single national consumer law and streamlined enforcement arrangements.
The reforms have three key elements:
- the development of a consumer law to be applied both nationally and in each State and Territory, which is based on the existing consumer protection provisions of the Trade Practices Act 1974, and which includes a new national provision regulating unfair contract terms, new enforcement powers and, where agreed, changes based on best practice in state and territory laws;
- the implementation of a new national product safety regulatory and enforcement framework, as part of the national consumer law; and
- the development of enhanced enforcement cooperation and information sharing mechanisms between national and state and territory regulatory agencies.
The purpose of the consultation paper is to:
- explain how the national consumer law will be developed;
- explain the nature and scope of COAG’s agreed reforms to create the national consumer law and, in some limited circumstances, seek views on specific aspects of those reforms; and
- seek views and explore options for augmentations and modifications to existing generic consumer protections which are based on best practice in existing state and territory laws.
Amongst other things, the law will target unfair terms in standard form contracts (such as those used for utilities, mobile phones and bank accounts). A contract term will be unfair if it charges consumers for breaches that do not reflect reasonable costs.
The new Australian Consumer Law will allow consumers and the ACCC to take action against contract terms that cause detriment or a substantial likelihood of detriment to consumers.
The legislative package will also include new powers for the Australian Competition and Consumer Commission, including:
- Civil pecuniary penalties;
- Disqualification orders;
- Infringement notices
- Substantiation notices;
- Public warning notices; and
- Court orders to seek redress for consumers who aren't party to a particular action.
The Minister also proposed changing the name of the Trade Practices Act to the 'Competition and Consumer Act' to better reflect the protections the law gives to Australian consumers.
Financial services implications
The Government has provided a commitment to maintain consistency between the Australian Consumer Law’s generic provisions and the consumer (or investor) protection provisions in credit and financial services laws, to the extent that it is practicable to do so.
The financial services laws are currently the subject of a reform process including the establishment of uniform national laws for the regulation of consumer credit.
Nevertheless there will be an overlap between the 2 sets of laws, especially in the area of unfair contracts.
Unfair contract terms are those that cause a significant imbalance in the parties’ rights and obligations arising under a contract and are not reasonably necessary to protect the legitimate business interests of the supplier. They are prevalent in standard form contracts.
The consultation paper lists banking and financial services, including credit agreements, as examples of contracts that may be affected.
Particular unfair terms that will be banned include:
- Unreasonable flat/fixed early termination fees and those requiring the paying out of the contract; and
- Terms requiring consumers to pay more than suppliers’ reasonable enforcement costs reasonably incurred.
