In 2020, the Fair Trading Act 1987 (NSW) introduced new amendments which require suppliers to take extra steps to inform consumers of certain terms and conditions. These changes have been enforceable from January 2021 and as of 31 July 2021, they will apply to all suppliers who provide goods or services up to $100,000 (the previous cap was $40,000).
Who do the changes apply to?
These amendments apply to all suppliers who supply goods or services to a consumer in NSW. A consumer is a person who acquires goods or services which:
- do not exceed $100,000; or
- exceed $100,000 but are of a kind ordinarily acquired for person, domestic or household use
The Act has extraterritorial application[1] which means suppliers need to comply if:
- they supply goods and services in NSW;
- their conduct affects any person in NSW; or
- the supply results in a loss or damage in NSW.
What are the changes?
Under section 47A of the Act, suppliers must, before the supply takes place, take reasonable steps to ensure the consumer is aware of the substance and effect of any term or condition relating to the supply of good or services that may substantially prejudice the consumer.
What terms are substantially prejudicial?
The Act lists four terms which may be seen as substantially prejudicial to the interests of the consumer. It is important to note that this list is not exhaustive and suppliers must disclose other term which may prejudice the consumer. The four terms listed in the act are:
- Terms which exclude the liability of the supplier;
- Terms that provide that the consumer is liable for damage to goods that are delivered;
- Terms that permit the supplier to provide data about the consumer to a third party; and
- Terms that require the consumer to pay an exit fee or balloon payment.
What do you need to do?
Suppliers must take reasonable steps to inform suppliers of the substance and effect of any substantially prejudicial term before supplying the consumer with goods or services.
Reasonable steps must be appropriate in the circumstances and sufficient to create awareness in the consumer. These steps should be clear, upfront and automatic. Some examples of reasonable steps provided by NSW Fair trading include:
- A short, plain English summary of the front page of the terms and conditions;
- Information provided in short form at key times (like on a payment page of a website); or
- The use of comics, illustrations or icons.
There is no one right way to make consumer’s aware of prejudicial terms. However, NSW Fair Trading has made it clear that suppliers need to take further steps than a standard check box at the bottom of the full terms and conditions.
What are the consequences for non-compliance?
Penalties which face suppliers for non-compliance with these obligations include:
- A maximum financial penalty of $22,000 for individuals or $110,000 for corporations, or
- A Penalty Notice from NSW Fair Trading for each offence of $550 for individuals and $1,100 for corporations.
For any assistance identifying substantially prejudicial terms, implementing reasonable steps to disclose these terms, or ensuring that your terms and conditions are up to date, please contact our corporate and commercial team.
For any assistance identifying substantially prejudicial terms, implementing reasonable steps to disclose these terms, or ensuring that your terms and conditions are up to date, please contact our corporate and commercial team.
Article prepared by: Shannon Walsh, Graduate
[1] Fair Trading Act 1987 (NSW) s 5A.
