Nick Xenophon (SA, Independent) Share this | Hansard source

May I begin by saying that I applaud the government for its intent in introducing the Trade Practices Amendment (Australian Consumer Law) Bill 2009. There is no question that reform is needed in the area of consumer law and that a national approach is needed, as Senator Hurley has outlined in her very thoughtful contribution. But I believe that this bill should go further. I believe that this is an opportunity lost.

Whether it is a mobile phone contract, a washing machine purchased under a 12-month interest free loan, a subscription program or a gym membership, standard form consumer contracts—that is, contracts that are not individually negotiated—are often complicated, confusing and in many cases give greater power to the business or the larger party, the more powerful party, than to the individual consumer. In addition, consumer laws currently vary between states and territories, making it confusing not only for consumers but also for businesses.

This bill will create uniform consumer law legislation, and that is a good thing. However, I am concerned that there has been a significant weakening, a watering down, of existing state consumer protections primarily in the area of unfair contract terms. Victoria has been at the forefront of effective laws against unfair contract terms, so it beggars belief that the Victorian laws will be watered down under this bill. That is not a good thing for consumers, because I think the Victorian law was a template of good law in protecting consumers.

While this bill is designed to address unfair contract terms and includes penalties, enforcement powers and consumer redress options, I believe this bill in its current form does not truly meet its intent. Accordingly, I will be introducing a number of amendments which I believe will strengthen this legislation so that it is truly in the best interests of Australian consumers and provides assurances to business.

There is no doubt that questionable consumer contracts exist and all too often consumers are either left with no option for recourse or find that the process to seek reimbursement for losses is too costly to be worth while. It is too costly and time consuming because of the hassles involved in trying to seek redress where clearly the wrong thing has been done to the consumer. It is a messy process. Some of the unfair contract terms which exist, whether intentional or unintentional, are often mind-boggling loopholes that most consumers never see coming. For example, in July last year, Telstra announced that it would be introducing a range of fees that would, it said, ‘reduce face-to-face customer service and drive more customers towards online bill payments’. From September, a $2.20 charge was applied to anyone who opted to pay their bill in person, with cash. That is something that many constituents have approached me about. They thought it was inherently unfair, particularly senior citizens, those that do not have online access and those that like the idea of the human contact of going to their local post office to pay the bill in cash because they do not have a credit card, they do not have online access or they just want to deal in cash. They were prejudiced.

I raised this matter with Telstra’s CEO, David Thodey. I passed on those consumer complaints directly to him in the course of discussions about another piece of legislation. Can I say that Mr Thodey was quite receptive. Whatever views one may have of what is before the parliament in terms of Telstra, I think Mr Thodey has been a breath of fresh air in terms of accessibility compared to the previous regime in Telstra. I am very pleased that, as a result of the public outcry, Telstra scrapped this fee. I think it was the right thing to do for consumers and the smart thing for Telstra to do from a public relations point of view as well. But I do know that similar charges continue to exist with other companies and I think that is inherently unfair. To charge a person for choosing to pay their bill in person with legal tender is not fair. When I raised this issue, and I am sure others of my colleagues have, there were many calls to my office and I received a lot of correspondence expressing concern about that. These are the sorts of unfair contract terms that should never have been allowed to creep into contracts. I will be moving an amendment to address this during the committee stage.

Also concerning are the number of contracts that allow the larger party, the business, to modify or cancel contracts without notice; yet the same flexibility is not afforded to the consumer, resulting in an imbalance of power between the two parties, which is fundamentally unfair. Here we have an opportunity to have a national approach, one that is not only good for consumers but good for businesses. It removes that uncertainty and provides uniformity. There are unnecessary costs for businesses, big and small. This national approach is long overdue. Internationally, the European Union adopted its directive on unfair terms in consumer contracts in 1993 and was followed by the United Kingdom the following year. These overseas laws are tried and tested and have been positive for consumers and could be similarly positive for Australian consumers. I do not think we have gone as far as the United Kingdom and Europe have in terms of unfair contract terms.

I think a way forward in making it easier for consumers, better for consumers, but also fairer for companies, is to have a ‘safe harbour’ approach. If that was adopted for consumer contracts, we would find these sorts of unfair terms could be avoided from the beginning. Under the safe harbour approach, which I acknowledge is an idea that comes from Associate Professor Frank Zumbo from the Australian School of Business at the University of New South Wales and who is a tireless advocate for consumers in the trade practices field, businesses would be able to approach the ACCC to seek approval or authorisation of particular contracts or contract terms. In doing so they would be ensuring that their contract is fair and reasonably necessary to protect the interests of the larger party and the consumer. Further, it could lead to industry-wide contract terms so that all relevant businesses could adopt these clearly defined and approved contract provisions. It would be similar to a template—a template of good practice which can be ticked off once it has been signed off by the ACCC. It is not unreasonable for the ACCC to take that approach. While some may suggest that this would be too onerous for the ACCC, I would argue that this would prevent unfair contract terms at the outset rather than having to address the issue once a possibly unfair contract is in place across the country. It is preventative in its approach. The ACCC has considerable experience in reviewing contractual arrangements and could readily use that experience to review contract terms under a safe harbour process for the benefit of both businesses and consumers. Furthermore, it would be a voluntary option for businesses, which would be seeking approval of their contract to ensure best practice. I believe that many businesses would appreciate this opportunity.

This bill, in its current form, also fails to include amongst its protections small businesses, which are just as vulnerable to unfair contract terms as individuals. A sole trader or a family business is as vulnerable in many cases as an individual when dealing with large businesses. My understanding is that business-to-business contracts under $2 million were originally included in the first draft of this legislation, when Minister Bowen was the responsible minister. However, it was subsequently removed. I would be grateful if the minister could advise, when we get to the committee stage, the basis of that change in policy. There were changes from when Minister Bowen had this portfolio to now when Minister Emerson has the portfolio, and it seems to me that there has been an appreciable weakening of the consumer protection provisions. I believe that small businesses are subjected to many of the same unfair contract terms as individual consumers and should be entitled to the same protections under this legislation.

I have a number of concerns with this bill and will outline them in more detail when I introduce my amendments. While this bill is intended to protect consumers and give them greater opportunities for redress in instances where they have been unfairly treated, there are significant gaps in the bill. While it is intended to ensure the balance between the two parties to a contract is fair and does not favour one over the other, there are ways in which this bill can be improved. I applaud the government for  recognising that reform is needed in the area of consumer law, which organisations and entities such as the Consumer Action Law Centre and Choice have been calling for for many years—as has Associate Professor Zumbo. But for this bill to meet its intent it needs to be strengthened; otherwise, we have laudable intentions without the follow-through to give it more substance, to give it more teeth. That is why I will move amendments during the committee stage. I will not delay the second reading stage unnecessarily by outlining those amendments.

I will give an example: it is crucial that consumers—both individuals and small businesses with contracts less than $2 million—are able to fairly and easily seek injunctions and damages wherever and whenever unfair terms of contract with larger parties exist against them. Not only will this cause larger parties who issue unfair contract terms to think twice before doing so but also it will serve as a deterrent and, I believe, will add a level of protection to individual consumers. Furthermore, the current inclusion of the terms ‘detriment’ and ‘transparency’ which courts must consider add unnecessary tests upon the consumer and the ACCC when the courts already have a discretion to make these determinations. Those additional hurdles for consumers are a real weakening of the legislation. They go against the intent of the bill, which is to make it easier for the consumer to seek redress. After all, this legislation aims to make it fairer for consumers—not harder. My concern is that the bill in its current form is an opportunity lost to do the right thing by consumers and small businesses in this country. I support the second reading motion, but I do believe that there is scope to improve this legislation so that we can give the protections that individuals and small businesses deserve.