Supplier Alert: New Consumer Disclosure Obligations Business Owners Ought to Know

Consumer law is susceptible to constant change and business owners should continuously and actively keep up to date with these amendments to ensure the fulfilment of their obligations and mostly importantly, to avoid any punitive penalties. This article raises some awareness concerning new disclosure requirements indorsed within the Fair-Trading Act 1987 (NSW) as of 1 January 2021.

Do these new consumer disclosure obligations apply to me?

The consumer disclosure obligations will apply to a business that engages in the following conduct:

1. The business supplies goods and/or services in New South Wales that:
2. Does not exceed $40,000; or
3. Does exceed $40,000 but the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption (for example a motor vehicle purchased by a family).
4. The conduct is in connection to goods and/or services supplied in New South Wales or that affects a consumer in New South Wales or results in loss or damage in New South Wales (regardless of whether the business is from another state).

It is important to keep in mind that the monetary threshold of $40,000 will be increased to $100,000 from 1 July 2021. This means that more business will be captured by the consumer law warranties, guarantees and contractual obligations.

What disclosures do you need to make to consumers prior to completing a sale?

If your business meets the relevant criteria outlined above, you should ensure that you are taking reasonable steps to disclose the following information to your customers:

1. The substance and effect of any terms which may “substantially prejudice” the interests of the consumer; and
2. Any commission or referral arrangements with another supplier when they recommend that a consumer buys goods or services from that third party supplier.

Suppliers must make the required disclosures to consumers before supplying the goods and/or services. In practice, this should be done before the consumer signs the contract, makes a payment, or otherwise commits to the supply arrangement.

How can my business assess if the substance and effect of its terms may ‘substantially prejudice’ the interests of consumers?

Section 47A of the Fair Trading Act sheds light on various terms or conditions which may be substantially prejudice.  These terms include those that:

1. Exclude liability on the part of the supplier; or
2. Imposes liability for damage to the goods and/or services on the consumer; or
3. Permits suppliers to provide data about consumers, use date provided by consumers, to a third party in a form that may enable the third party to identify the consumer; or
4. Requires the consumer to pay a cancellation fee, balloon or similar payment.

These are just some examples that business should familarise themselves with, however, they do not represent an exhaustive list of terms and conditions which may entail the need for consumer disclosure.

Has your business taken ‘Reasonable steps’ to disclose its prejudicial terms?

Businesses need to ensure that they are taking reasonable steps to fulfill their consumer disclosures. Although the requirement to take reasonable steps will differ and depend on the circumstances of each case, Fair Trading has shed some light as to how your business should tackle these requirements.

In summary, your business should:

1. Be clear, and not require consumers to actively seek out the information;
2. Be upfront with consumers;
3. Draw clear attention to consumers of the terms and conditions. Provide explanations about what these terms mean to ensure information is disclosed clearly and effectively;
4. Explanations should be written in easy to read, plain English;
5. Should be clearly marked on the front of contacts;
6. If there is a large set of conditions which need to be accepted online, ensure short summaries are provided and can be easily accessed on payment pages;
7. Ask consumers for verbal confirmation of their understanding;
8. Initial the terms and conditions of the certain terms and conditions;
9. Allow for tick-a-box option on websites.

What Disclosures are Required for Commission and Referral Arrangements?

Businesses must take reasonable steps to make consumers aware of any commission or referral arrangement in which the business receives a financial incentive from a third party supplier. Reasonable steps in this instance does not oblige the business to reveal the nature or value of the incentive, but merely requires the business to advise the customer that a financial incentive exists. Such disclosure must be made prior to the intermediary acting under the arrangement in which they receive the incentive fee. The requirement to disclose includes transactions that occur online where one of the parties to the arrangement is from interstate.

What Penalties Apply If I Fail to Disclose?

The applicable penalties for non-compliance with these new consumer disclosure obligations are rather substantial, so it is crucial that you continue to engage in conduct which is compliant.

The penal penalties include:

1. $110,000 for corporations; and
2. $22,000 for individuals.

Key Takeaways

There are presently new disclosure obligations introduced in New South Wales which entail heavy fines for non-compliance. As such, it is essential that you:

1. Identify any terms in your contracts with NSW consumers which are likely to be significantly prejudicial to consumers and whether you have an arrangement where you receive a financial incentive for referring customers to another supplier of goods or services.
2. Ensure that these terms are compliant with the unfair contract term regime prescribed by the Australian Consumer Law (ACL) so that they can be lawfully enforced against consumers, to the extent this regime applies to your contract. It is important to keep in mind that there are serious penalties available under the ACL for making false and misleading representations in trade or commerce, including misleading consumers as to their rights and obligations under the ACL.
3. Update your disclosure processes to ensure that any terms which are significantly prejudicial to consumers, even if they are fair, are clearly explained to customers upfront as well as any financial incentive arrangements which mean you will receive a benefit from a referral.

How we can help you

JHK Legal has extensive experience in reviewing contractual terms, and can advise companies, individuals and third-parties on their consumer law obligations. Please do not hesitate to contact us today to discuss your concerns.

Written by, Rania Kassir

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