On 25 June 2009 the Federal government introduced the National Consumer Credit Protection Bill 2009 into the House of Representatives. The bill is designed to protect consumers from unfair terms in standard form contracts.

Initially the bill was to apply to companies, individuals and consumers in relation to consumer credit and business-to-business transactions. Standard form contracts are used extensively by credit providers and business operators and in most cases the other party has no effective opportunity to negotiate its terms. It was proposed that a test for unfairness be applied to the terms of the contract.

The bill’s introduction into parliament was followed by an announcement by the Consumer Affairs and Small Business Minister Craig Emerson that the new bill would not apply to business-to-business transactions.

Whilst this may appear to be good news for businesses, the government has not given up on this issue. The bill has been referred to the Senate Economics Committee for reporting on 7 August 2009, in time for the spring session of parliament which commences on 10 August 2009. Mr Emerson has asked that the unconscionable provisions of the Trade Practices Act 1974 (Cth) be investigated in relation to standard form contracts used in business transactions.

In fact, in Victoria, the government has passed its own version of the consumer protection laws even though it is aware of the Federal government’s proposals to regulate unfair contracts Australia wide. On 10 June 2009, the Fair Trading and Other Acts Amendment Bill 2009 received royal assent and the changes made to the Fair Trading Act 1999 (Vic) came into effect on the following day.

Part 2B of the Fair Trading Act 1999, involving unfair contract terms, applies to consumer credit contracts. Its implementation means that:

  • unfair terms in consumer credit contracts are void;
  • the current “good faith” aspect of the test is removed, resulting in a new test for unfairness being based on whether, in all the circumstances, a term in a consumer contract causes a significant imbalance to the detriment of the consumer; and
  • if any terms in the standard form consumer contract are “standard” (not being subject to negotiation) they will be unenforceable from the time that they are standardised.

In Victoria credit providers should immediately review their standard form consumer contracts. A copy of the amendments can be found here.