Recent changes to the Fair Trading Act 1987 (NSW) (Fair Trading Act) have altered the way businesses operating in New South Wales (NSW) are required to communicate with consumers. Businesses and intermediaries in NSW are now obligated to disclose certain information to consumers. This information includes:
- any term or condition relating to the supply of goods or services that could substantially prejudice a consumer; and
- any form of financial incentive that intermediaries are entitled to for the provision of their services.
What is a “consumer”?
A consumer is defined under the Australian Consumer Law as a person who acquired a good or service for less than $40,000, or, if the good or service was acquired for more than that, a person who acquired a good or service for ordinary personal, domestic, or household use or consumption.
It should be noted that this $40,000 threshold will rise to $100,000 on 1 July 2021.
When will a consumer be “substantially prejudiced” by a term or condition?
The Fair Trading Act sets out several ways in which a consumer can be prejudiced by a term. A term will substantially prejudice a consumer if it:
- excludes the liability of the supplier;
- provides that the consumer is liable for damage to goods that are delivered;
- permits the supplier to provide data about a consumer to a third party in such a way that they could be identified; or
- requires the consumer to pay an exit fee, balloon payment or other similar payment.
This list is not exhaustive and other terms or conditions that may substantially prejudice a consumer should also be disclosed.
An intermediary is a person who arranges contracts for the supply of goods or services or refers customers to another supplier of goods or services for financial incentive. The Fair Trading Act defines financial incentive as a commission, referral fee or other kind of payment prescribed by regulations. Real estate agents, travel agents and mortgage brokers are examples of intermediaries.
Intermediaries must ensure that consumers are aware of the arrangement of the financial incentive for their services. Intermediaries are not required to discuss the specifics of the incentive only that one is being paid.
How must disclosure be made?
Businesses and intermediaries must take reasonable steps to ensure that disclosure of the above information is clear and upfront. Steps must be appropriate in the circumstance and sufficient to create awareness in the customer.
The disclosure should be made before the supply of goods or services, be in clear English and be easily identifiable (i.e. the consumer should not have to go looking for it).
Failure to comply with the Fair Trading Act can result in a variety of different penalties including;
- a financial penalty of $110,00 for corporations or $22,000 for individuals;
- compensation for any loss or damage suffered by the consumer; and
- a penalty notice of $1,100 for a corporation or $550 for individuals.
To avoid these penalties businesses should assess their contracts for any terms that may substantially prejudice consumers and intermediaries should take note of arrangements in which they are receiving financial incentives. They should then take reasonable steps to implement changes to ensure these new standards of disclosure are met.
If you have any questions or concerns related to disclosure obligations, please do not hesitate to contact us.