From 1 January 2021, businesses dealing with consumers in New South Wales (NSW) are liable to penalties if they do not disclose to consumers:
- terms of contracts that substantially prejudice the interests of the consumer;
- if the business receives a commission or referral fee when recommending the consumer buys goods or services from another supplier.
The legislation applies to businesses (companies and individuals) whether located inside NSW or not that are dealing with “consumers” in NSW.
Disclosure of substantially prejudicial terms
Businesses caught by the new law must take reasonable steps to make customers aware of the substance and effect of terms that may ‘substantially prejudice’ the interests of consumers.
Currently there is no clear provision defining what constitutes a substantially prejudicial term.
Disclosure of substantially prejudicial terms must be made before supplying the goods or services. For example, before the consumer signs the contract or makes a payment.
Disclosure of commission or referral arrangement
Where a business acts as an intermediary receiving a financial incentive from another supplier, it must take reasonable steps to make customers aware of any commission or referral arrangements with another supplier when recommending goods or services provided by that supplier.
Disclosure must be made before acting under such commission or referral arrangement. For example, before the consumer is redirected from the intermediary to the supplier or before the consumer makes the purchase.
What constitutes “reasonable steps”?
There is no guidance in the legislation as to what constitutes “reasonable steps”. According to the NSW Department of Fair Trading, “reasonable steps” means taking actions that “one would reasonably expect would create awareness in a consumer” and should be:
- appropriate in the circumstances; and
- sufficient to create awareness in the consumer.
What businesses need to do if they supply goods or services to NSW consumers
If your business supplies goods or services to NSW consumers, you should:
Step 1 Identify any terms which might “substantially prejudice” the interests of a consumer.
Step 2 Consider what “reasonable steps” you need to take to alert consumers of these terms before supplying the consumer with the relevant goods or services.
Step 3 Take those reasonable steps.
In light of the lack of guidance in the legislation, steps 1 and 2 will very much depend on the nature of your business and how you supply your goods and services.
The fines for breaching this law are substantial – up to $110,000 for corporations and $22,000 for individuals so don’t take the risk. We are here to help.
If you need assistance in reviewing your terms and conditions of supply, please contact Everingham Solomons because Helping You is Our Business.
Click here for more information on Ya Zhang.