Going to Market is a monthly publication tracking developments in consumer law legislation, regulation and case law.

The risks for organisations from breaching consumer law are high with increased penalties, new fair trading and consumer credit regimes and more intensive regulatory activity.

Our team of consumer law specialists can assist you in all areas of consumer law, including advice on products liability and recall, compliance programmes, contracts review, defending regulatory investigations and prosecutions as well as commercial litigation focusing on consumer law.

Legislation

Australia

Unfair contract terms provisions extend to small business

The Small Business and Unfair Contract Terms Act 2015 will cover business-to-business standard form contracts where:

  • at least one party to the contract is a business that employs fewer than 20 persons (excluding casual employees), and
  • the upfront price payable under the contract does not exceed AUD$300,000 or, for contracts lasting longer than 12 months, AUD$1,000,000.

Link: Small Business and Unfair Contract Terms Act 2015

Australian Financial System Reform – Improving Consumer Protection

The consumer protection changes which will be implemented arising out of the wide-ranging Australian Financial System Inquiry include:

  • phase in a legislated ban on card surcharges that exceed the reasonable costs faced by merchants in accepting cards, and
  • ensure remuneration structures in financial services firms do not adversely affect the quality of advice consumers receive.

Link: Government response to Inquiry recommendations

Banking Ombudsman

Room to improve bank online complaint information

The Banking Ombudsman has conducted a survey of how well banks present complaints information on their websites. The Ombudsman makes the following recommendations:

  • add the dispute resolution scheme to complaint pages
  • provide links to the dispute resolution scheme’s quick guides, which explain important or contentious aspects of banking
  • develop a tool to enable customers to track their complaints, and
  • provide a complaint form in a format that is mobile-friendly.

Link: Ombudsman’s report

Australian Competition and Consumer Commission

Airbnb and eDreams give undertakings to improve pricing practices

Airbnb and eDreams have provided undertakings to the ACCC that mandatory fees will be incorporated into prices disclosed on key pages during the booking flow to ensure consumers have accurate price information “up front”. The ACCC found that:

  • Airbnb failed adequately to disclose a mandatory Service Fee and Cleaning Fee, where applied by an accommodation host, on Search Results and Accommodation Listing pages on its websites, mobile site and apps, and
  • eDreams failed to comply with the requirement to specify a single total price inclusive of the mandatory Service Fee and Payment Fee, in circumstances where those fees were quantifiable at the time of the price representations.

This investigation was conduct by the ACCC as part of its commitment to address drip pricing practices in online purchasing across a number of sectors including airline, ticketing, and accommodation services.

Links: Airbnb’s Undertaking and eDream’s Undertaking

ACCC v Homeopathy Plus! Australia Pty Ltd (No 2)

The Federal Court of Australia has ordered Homeopathy Plus! to pay penalties of AUD$115,000 for making false or misleading representations about the effectiveness of the whooping cough vaccine and of homeopathic alternatives.

The Judge held that, on the facts, the absence of actual loss or harm to consumers was not a mitigating factor in the penalty assessment because of the very serious consequences the claims (made without any credible basis) could have caused to the Australian community.

Link: ACCC v Homeopathy Plus! Australia Pty Ltd (No 2) [2015] FCA 1090

Loyalty programme not a pyramid scheme

The Federal Court has found that a loyalty programme operated by Lyoness Australia does not contravene provisions in the Australian Consumer Law (ACL) relating to pyramid scheme and referral sale techniques.

The ACCC alleged that Lyoness programme was an illegal pyramid scheme because it offered bonuses to consumers if they introduced new members who also shopped or made a down payment on future shopping. But the Federal Court rejected the ACCC’s argument on the basis that the member’s entitlement to receive a benefit was triggered – not by the introduction of new members – but by the shopping activities by those new members.

The ACCC is currently reviewing this decision.

Link: ACCC v Lyoness Australia Pty Ltd [2015] FCA 1129

Australian Securities and Investments Commission

National Australia Bank changes debt collection practices

National Australia Bank has made changes to its debt collection practices following concerns raised by ASIC that some of its debt collection letters may have been misleading, deceptive or unconscionable because they:

  • used letterheads of “Fairhalsen Collections” and “Brunswick Collections Services”, which may have given the incorrect impression that the bank had sold, outsourced or otherwise escalated a debt when in fact these entities were part of NAB. This fact was only disclosed fine print at the bottom of the page, and
  • stated that if the debt was not paid, legal proceedings for recovery might commence without further notice or a debt collector might visit the customer’s home to collect the debt. In fact, for the majority of recipients, such action was either unlikely or would only be considered at a later stage in the collection process.

ASIC Deputy Chairman said: “Collectors must not threaten legal action if such action is not possible, not intended, or not under consideration.”

Link: NAB changes debt collection practices

ASIC targets mortgage broker

ASIC was concerned about Elite Mortgage Brokers’ advertising materials, which include the statement “100% success rate”. In ASIC’s view, lenders or brokers that are subject to responsible lending obligations generally cannot claim that all applicants will receive credit- doing so is either non-compliant with the lending laws or otherwise misleading or deceptive.

Link: Elite Mortgage Brokers

Online tools to help consumers understand the risks of interest-only mortgages

ASIC has launched a new website to help consumers better understand the risks of interest-only mortgages. The website includes an interest- only mortgage calculator to help consumers work out the cost of an interest-only home loan.

This initiative follows ASIC’s recent probe into the interest-only mortgage market which found that lenders are not meeting their responsible lending obligations. In particular, ASIC identified instances where the expenditure benchmarks had been relied upon to approve the loan rather than the borrower’s actual living expenses.

Links: ASIC’s recent probe and Online Tools

United Kingdom Financial Conduct Authority

UK payday lender to refund £15 million to customers

Dollar Financial UK is to repay approximately £15 million to 147,000 customers who may have suffered detriment as a result of the firm’s affordability checks, debt collection practices, and system errors. The FCA found that many customers were lent more than they could afford to repay.

Link: UK payday lender to refund £15 million to customers

Consultation on price comparison websites displaying payday loans

The FCA has launched a market consultation on its proposal for additional standards for price comparison websites which compare high-cost short-term credit products. The proposals include new requirements to:

  • rank products in ascending order of price according to the total amount payable and not give products greater prominence as a result of commercial relationships
  • enable consumers to search according to the amount and duration of loan that they require, and
  • list the number and names of the firms against which their products are being compared.

The consultation paper will also address a number of other areas including the use of real-time data sharing to enable informed credit assessments and improved disclosure on the costs of borrowing.

Link: Consultation on price comparison websites displaying payday loans

US Federal Trade Commission

BMW of North America violates Consumer Warranty Law

The Mini Division of BMW of North America has violated the Warranty Act by telling consumers that BMW would void their warranty unless they used Mini parts and dealers to perform maintenance and repair work.

BMW is also barred from representing that, to ensure a vehicle’s safe operation or maintain its value, routine maintenance must be done only by Mini dealers or centres – unless BMW can substantiate this claim with competent and reliable scientific evidence.

Link: FTC’s press statement – BMW of North America

Sprint to pay US$2.5 million for failure to give credit notices

Sprint will pay US$2.5 million for failing to give timely credit notices to consumers with low credit scores who had been placed in a in a program which charged an extra monthly fee. When credit notices were provided, they often came too late for the consumer to change to another mobile service provider without paying an early termination fee.

Link: FTC’s press statement – Sprint

Market News

Amazon sues “1,000 fake reviewers”

Amazon has issued proceedings against approximately 1,000 people for putting fake reviews on its website, many of them without even trying the products. The latest court proceeding comes after Amazon sued a number of websites in April 2015 for selling fake reviews.

Link:  Amazon sues “1,000 fake reviewers”