By Sky Kim and Kerensa Sneyd
On 26 October 2018, two amending Acts commenced that will further improve consumer protections and enhance regulator powers.
Unfair contract terms investigation powers for ASIC
New protections for consumers and small businesses against the use of unfair contract terms have been introduced as part of a set of statutory amendments to clarify and strengthen consumer protections more generally. In addition to unfair contract terms, which are the most relevant to the financial services industry, these additional protections relate to consumer guarantees, unsolicited consumer agreements, product safety, false billing, unconscionable conduct, and pricing. The new protections are contained in the Treasury Laws Amendment (Australian Consumer Law Review) Act 2018 (ACL Act) which implements certain recommendations of the Australian Consumer Law Review Final Report by amending the Competition and Consumer Act 2010 (Cth) (CCA) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
The ACL Act has introduced amendments to the ASIC Act that now enable the Australian Securities and Investments Commission (ASIC) to investigate possible unfair contract terms. This is an important change because until now ASIC’s investigative powers were only triggered by contraventions or possible contraventions of the law. This meant that their investigative powers did not allow for investigations of possible unfair contract terms, because the use of unfair contract terms is not prohibited by law (but of course the terms may be void). Similar powers have also been given to the Australian Competition and Consumer Commission to enable investigation of possible unfair contract terms under the CCA.
As a result of these changes, ASIC can now “make such investigations it thinks expedient” into the terms of a standard form consumer or small business contract that is subject to the unfair terms regime for the purposes of determining whether to apply to the Court for a declaration that a term is unfair and therefore void. ASIC can only exercise this investigation power in relation to standard form contracts entered into on or after 26 October 2018.
One of ASIC’s current strategic priorities is investigating and enforcing cases of unfair contract terms involving small business. In August 2018, ASIC received an additional $70.1 million of funding and part of these funds are directed towards expanding ASIC’s enforcement work on unfair contract term protections for small business. Combined with these new investigation powers, we expect to see ASIC increase their activities in the unfair contract terms space throughout 2019.
A copy of the ACL Act is available here.
A national regime to regulate gift cards
There will now be a national regime to regulate gift cards. It is introduced by the Competition and Consumer Amendment (Gift Cards) Act 2018 (Gift Card Act) which amends the Competition and Consumer Act 2010 (Cth) (CCA). This regime will apply to all gift cards issued on or after 1 November 2019, which allows a period of time for gift card suppliers to expend their existing stock of gift cards and adjust to the changes. The Gift Card Act also introduces amendments to the CCA so that these provisions also apply to gift cards that are financial products under the Corporations Act 2001 (Cth) (as the Australian Consumer Law does not otherwise apply to financial products).
The Gift Card Act introduces a definition for ‘gift card’, being:
(a) An article (whether in physical or electronic form) that:
a. Is of a kind that is commonly known as a gift card or gift voucher; and
b. Is redeemable for goods or services; or
(b) An article of a kind specified in the regulations made for the purposes of this paragraph,
but does not include an article of a kind specified in the regulations.
The Explanatory Memorandum observes that this definition can capture items that are not promoted as ‘gift cards’ and can include cards provided by suppliers to discharge a legal liability (for example, an insurance company providing a gift card to a policy holder to discharge an obligation under an insurance contract).
From 1 November 2019, gift cards must meet the following new requirements:
- Gift cards must have a minimum three year expiry period;
- Information about the expiry date must be displayed prominently on the gift card itself;
- Terms and conditions cannot allow certain post-supply fees to be charged; and
- Certain fees cannot be charged after gift card is issued.
A term or condition of a gift card is void to the extent it reduces the expiry period earlier than three years, or allows or requires payment of a post-supply fee.
These requirements are imposed on a person who, in trade or commerce, supplies a gift card to a consumer. This may not necessarily be the person who first sells the gift card (for example, this will not capture a wholesale gift card company selling gift cards to a retail company) or the person who gives the gift card to the final end user. Whether the supply is undertaken in trade or commerce will be determined by reference to the definition of ‘trade or commerce’ in section 2 of the Australian Consumer Law.
A contravention of any of these requirements is a strict liability offence. The maximum penalty per offence is $30,000 for a body corporate and $6,000 for persons other than a body corporate.
In addition to the new requirements, regulation-making powers with respect to gift cards have also been introduced. These powers can be used to exempt certain gift cards, persons and gift cards supplied in certain circumstances from the application of these provisions.
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