Changes apply from 1 January 2011

The new Australian Consumer Law will replace previous Commonwealth, State and Territory consumer protection legislation in fair trading acts and the Trade Practices Act 1974. The new law incorporates best practice from existing State and Territory legislation.

Much of the new law will be familiar, however some key changes apply to:

• consumer guarantees
• product safety
• acceptable business practices 
• unfair contract terms
• sales practices
• penalties.

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Consumer guarantees are a new comprehensive set of rights and remedies for defective goods and services. Consumer guarantees replace existing statutory warranties on goods and services.

Consumer guarantees apply to:

• any type of goods or services costing up to $40,000
• a vehicle or trailer used mainly to transport goods regardless of the cost
• goods or services costing more than $40,000 which are normally used for personal, domestic or household purposes
• leased, hired and second-hand goods.

Which goods are not covered?

Consumer guarantees do not apply to goods:

• bought before 1 January 2011
• from one-off sales by private sellers such as garage sales and fetes
• at auctions, where the auctioneer acts as agent for the owner
• costing more than $40,000 that a person would normally buy for business use
• to on-sell or re-supply
• to use, as part of a business to manufacture or produce something else, or to repair or use on other goods or fixtures.

Which services are not covered?

Consumer guarantees do not apply to services:

• bought before 1 January 2011
• costing more than $40,000 which are for commercial use
• for transportation or storage of goods for the consumer's business, trade, profession or occupation
• for insurance contracts.

The new consumer guarantees do not significantly change existing rights and obligations but make them clearer.

Consumers will automatically receive a consumer guarantee from the supplier regardless of any voluntary warranties that the manufacturer provides. Whoever sold the goods or services, or made the goods, must honour the consumer guarantee.

False and misleading claims

A supplier cannot tell a consumer that a consumer guarantee does not exist. For example, it would be misleading to suggest that defects are only covered by a manufacturer's warranty.

A supplier cannot tell a consumer that they must pay for rights equivalent to a consumer guarantee.

Remedies

Consumer guarantees apply to both minor and major failures with goods and services. If something goes wrong, the consumer should seek a remedy from the supplier and the supplier, in turn, can seek a remedy from the manufacturer.

Minor problems can normally be put right. Major problems are ones that cannot be fixed or are too difficult to fix.

For minor problems the supplier can choose to:

• repair
• replace or
• refund.

For major problems the consumer can choose:

• a refund
• a replacement or
• compensation.

When seeking a remedy, consumers are not required to return the goods to the supplier in the original packaging.

'No refund' and other signage

Signs that state 'no refunds' are unlawful, because they imply it is not possible to get a refund under any circumstance - even when there is a major problem with the goods or service.

For the same reason, the following signs are also unlawful:

• 'No refund on sale items'
• 'Exchange or credit note only for return of sale item'.

Signs that state 'No refunds will be given if you have simply changed your mind' are acceptable.

Warranties and consumer guarantees

A supplier or manufacturer has to honour all warranties and consumer guarantees.

Common types of voluntary warranties include an express warranty, a warranty against defects/manufacturer’s warranty and an extended warranty.

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The Australian Consumer Law includes a national product safety regime. NSW Fair Trading and the Australian Competition and Consumer Commission (ACCC) have specific product safety roles under the law which are summarised below.

Mandatory reporting requirements

Suppliers must notify the ACCC within 2 days of becoming aware that a consumer good or product related service they have supplied has, or may have, caused serious injury, illness or death.

Safety warnings, bans and recalls

Both the Commonwealth Minister and NSW Fair Trading Minister can issue safety warning notices and interim bans in NSW. Interim bans last for 60 days and may be extended to allow further investigation.

Only the Commonwealth Minister can impose permanent bans. Any ban imposed by the Commonwealth applies throughout Australia.

Compulsory recalls

Both the Commonwealth Minister and NSW Fair Trading Minister can issue a compulsory recall notice for consumer goods that:

• will or may cause injury
• do not comply with a mandatory safety standard, or
• are banned.

Mandatory safety standards

Only the Commonwealth Minister can make mandatory safety standards that set specific requirements for consumer goods or product related services.

Any standard made by the Commonwealth applies throughout Australia.

For more information, visit the national product safety website www.productsafety.gov.au

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Some rules around business practices have changed under the law. A summary is listed below.

Proof of transaction

Suppliers must provide proof of a transaction to consumers for goods or services:

• valued at $75 or more (as soon as practicable)
• valued under $75 within 7 days, if requested by the customer.

Proof could include a tax invoice, cash register receipt or a handwritten receipt.

Itemised bills

A consumer can ask a supplier for an itemised bill for services. This request must be made within 30 days of whichever happens later:

• the services are supplied, or
• the consumer receives a bill or account from the supplier for the supply of the services.

 The itemised bill must be:

• provided without charge
• provided within 7 days of the request
• expressed in plain language, legible and clear.

False or misleading representations

A number of changes or additions apply to the existing law on false or misleading representations. When providing goods and services it is unlawful to make:

• false or misleading testimonials
• false or misleading representations about consumer guarantees.

Offering rebates, gifts, prizes etc

Suppliers should provide rebates, gifts or prizes as described to the consumer within the time stated in the offer, or if no time is stated within a reasonable time.

Supply after accepting payment

If the supplier accepts payment, the goods or services should be supplied to the consumer as described and within the specified time, or if no time is specified, within a reasonable time.

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Unfair contract terms provisions introduced in July 2010 become part of the Australian Consumer Law on 1 January 2011.

The law applies to standard form consumer contracts for the supply of goods and services, or for the sale or grant of an interest in land, to an individual for personal, domestic or household use.

It does not apply to business-to-business contracts. Most insurance contracts are not covered.

The unfair contract terms provisions do not apply to terms that:

• describe the goods, services or land that a consumer has agreed to buy
• set the upfront price payable under the contract, provided the price is disclosed before the contract is entered into
• are required or permitted by law.

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Some rules for sales practices will change. A summary of the changes is outlined below.

Unsolicited consumer agreements

New rules apply to unsolicited consumer agreements for goods and services.

The rules apply if negotiations are with a telemarketer or a salesperson at a location other than the supplier’s premises, the consumer did not invite the telemarketer or salesperson and the transaction is more than $100 or the value cannot be established.

The following is not considered an invitation to supply:

• requesting a quote
• giving a dealer contact details for another purpose such as a competition
• contacting a supplier in response to an unsuccessful telephone call or visit.

Permitted hours

The permitted hours in which a telemarketer or salesperson can call have changed. Under the law sellers cannot visit or call on:

• weekdays - before 9am or after 6pm (after 8pm for phone calls)
• a Saturday – before 9am or after 5pm
• a Sunday or public holiday.

Contract and cooling-off period

If a consumer agrees to buy something from a telemarketer or salesperson, they must be given a written copy of the contract and be informed of the cooling-off period.

A 10-business day cooling-off period now applies, during which consumers can cancel a purchase without penalty.

Payment and supply of goods and services

The new rules do not allow a supplier to supply any goods or services, or accept or require payment, during the cooling-off period.

To give businesses time to adjust, for the first 12 months of the ACL, a supplier can choose to:

• comply with the ACL or
• comply with the previous NSW law under which businesses must not collect any fees during the cooling-off period for services supplied during that period.

Exemptions

Unsolicited consumer agreement laws do not apply to:

• business contracts
• party plan events
• renewing an existing contract.

Unsolicited goods and services

A consumer who receives unsolicited goods or services does not have to pay for them. Or for any loss or damage due to supply of a service.

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The maximum criminal penalties are significantly higher than those which previously applied.

The maximum penalty is $1.1 million for a body corporate and $220,000 for an individual. New pecuniary penalties will apply for the same amount.

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The Fair Trading Act will still operate in relation to important provisions not contained in the ACL, including:

• functions and powers of the Director-General 
• legal assistance 
• powers of investigators 
• industry-specific regulation.

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Transactions that take place before 1 January will continue to be covered by the previous legislation after 1 January 2011.

For example, goods sold on 24 December 2010 will be covered by the existing statutory warranties, not the new consumer guarantees.

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The Australian Consumer Law is jointly enforced by:

• NSW Fair Trading and other State and Territory fair trading agencies
• Australian Competition and Consumer Commission (ACCC)
• Australian Securities and Investments Commission (ASIC) (for financial goods and services).

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