NSW Fair Trading is likely to be more actively monitoring and enforcing new disclosure obligations under the Fair Trading Act 1987 (NSW), which were introduced in 2020. These obligations require suppliers to consumers to take extra steps to disclose certain terms and conditions to consumers.   

The new consumer disclosure requirements were introduced in July 2020, and after a grace period during which NSW Fair Trading took an education and awareness raising approach to compliance, we expect the state regulator to take a more active approach to monitoring and enforcement from now on.

The new provisions require businesses to “take all reasonable steps” to ensure consumers are aware of the “substance and effect” of terms and conditions which “may substantially prejudice” their interests.

In addition, where an intermediary receives a financial incentive, the intermediary must take all reasonable steps to ensure the consumer is aware of the existence of the arrangement that provides for the financial incentive.

These obligations apply to all supplies to consumers (in NSW),[1] as defined by the meaning of “supply” and “consumer” provided for in the Australian Consumer Law (ACL). Importantly, the obligations are additional to suppliers’ obligations faced under the unfair contract terms regime and other consumer protection provisions of the ACL.

What constitutes “reasonable steps” and “substantial prejudice” are not defined under the new requirements in s47A and s47B of the Fair Trading Act 1987 (NSW). Whether disclosure is appropriate and sufficient to create an awareness in the consumer will depend on factors including:

  • the nature of the supplier
  • the circumstances of supply, and
  • the customer journey from first contact to purchase.

What is clear, however, is that a “check box” that a customer has read the terms and conditions before they proceed to check-out, without more, is unlikely to be an adequate disclosure in most cases.  

Pecuniary penalties and other enforcement action can apply, with the NSW regulator having power to take action.

We are helping clients to understand what these obligations require of them, in light of their business and customer journeys.

If you supply consumers directly, particularly online, we recommend reviewing all your terms and conditions in light of these new obligations. We have been doing a number of these reviews for clients and would be pleased to help.

What terms “may substantially prejudice the interests of the consumer”?

Terms that are be deemed to satisfy the threshold of “may substantially prejudice the interests of the consumer” include any term that:

  • excludes the liability of the supplier (including limitations on liability);
  • makes the consumer liable for damages to goods that are delivered;
  • permits the supplier to provide data about the consumer, or data provided by the consumer, to a third party in a form that may enable the third party to identify the consumer; or
  • requires the consumer to pay an exit fee, balloon fee or other similar payment.

However, suppliers must review all terms and conditions to ensure that there are no other additional terms or conditions that “may substantially prejudice the interests of the consumer” in the circumstances.  Additional provisions that may warrant review include automatic rollover clauses, unilateral variation or termination rights, or broad rights to reject supply.

What are reasonable steps and when should they be taken?

Reasonable steps must be sufficient to make the consumer aware of the substance and effect of the term or condition.  NSW Fair Trading recommends the disclosures should be clear, upfront and automatic. 

The circumstances of the supply will generally dictate what are reasonable steps.  Importantly, disclosure must be made prior to the point at which the consumer commits to the supply (e.g. before the consumer enters into the contract or makes payment).

What happens if I don’t take all reasonable steps to make the disclosure?

Non-compliance with these requirements may result in suppliers facing investigation and enforcement action by NSW Fair Trading.  Failure to comply with the disclosure obligations may attract penalties including:

  • maximum financial penalty of $110,000 for corporations and $22,000 for individuals;
  • disqualification from managing corporations; and/or
  • compensation for any loss or damage suffered by the consumer.

In the alternative to the above penalties, NSW Fair Trading can issue penalty notices of $1,100 per offence for a corporation and $550 per offence for an individual.

What should I do?

We recommend reviewing all terms and conditions relevant to the supply of your goods and services to consumers, particularly for the types of terms that are deemed to meet the threshold outlined above and other terms that “may substantially prejudice the interests of the consumer”. 

Where terms that enliven the obligations are identified, suppliers need to consider what form of disclosure and drafting is needed comply with the legislation, which could include:

  • a pop-up screen
  • a summary of prejudicial terms, or
  • more detailed check-boxes that the consumer must read or “tick”.

Whichever strategy is chosen, suppliers need to ensure that that the disclosure is inserted at the point in the customer journey that most draws their attention to the “substance and effect” of the relevant term.