Changes to Disclosure Requirements in NSW for Suppliers of Goods or Services in 2021

KEY TAKE-OUTS

Businesses are now required to disclose to their customers:

• Any term or condition in their contract may substantially prejudice the interests of consumers;
• That the business is sending or selling consumers information to a third party;
• That the business receives a commission or any other benefit when they recommend a good or service from a third party.

Disclosure of prejudicial terms

As of 1 January 2021, NSW Fair Trading is enforcing a new law following reforms to s47A of the Fair Trading Act 1987 (NSW) which forces businesses that supply goods or services to consumers in NSW to take reasonable steps to ensure that the consumer is aware of the effect of any contract term that may substantially prejudice the consumers interests.

What are the new requirements?

The recent changes go further than existing consumer law by imposing a positive obligation on the business to bring terms against the consumers interest to their attention.

Businesses are now required to disclose to their customers:

• Any term or condition in their contract may substantially prejudice the interests of consumers;
• That the business is sending or selling consumers information to a third party; or
• That the business receives a commission or any other benefit when they recommend a good or service from a third party.

When will a term “substantially prejudice” a consumer?

Substantially prejudicial terms may include terms which:

• Exclude Liability – a term that states that a supplier is not liable for any loss suffered by a consumer or damage to a product during delivery;
• Provide data to a third party – a term which allows a supplier to sell or share data in a way that the consumer could be identified;
• Include Additional fees – a term that requires a consumer to pay exit fees or a balloon payment such as a payment of outstanding membership period upon cancellation of a membership.

How can a business take “Reasonable steps” to inform?

There is no set definition of reasonable steps, but a business could:

Highlight terms that may be prejudicial

• Place a clear plain English summary of relevant terms on the front page of an agreement for consumers to sign;
• For online sales, have a pop-up box explain certain terms and their effect; or
• Highlight key terms by using colours, illustrations, or icons.

Acknowledge all commission arrangements

• Include appropriate disclosures in contracts;
• Direct consumers’ attention to appropriate signage;
• For online sales, include appropriate disclosure in pop up boxes; or
• Put an automatic disclaimer on the bottom of emails.

Note: what is reasonable depends on each circumstance. If prejudicial terms are complex, the business will need to go further to ensure that the consumer understands the term.

What should I do if I supply goods or services in NSW?

Take 3 key steps:

1. Identify any potentially prejudicial or one-sided terms in your contract and either amend them to reduce the prejudicial effect, or if you wish to keep the term, ensure term is brought to consumers attention and understood;
2. Identify if you are selling or providing any consumer information to third parties and if you do, ensure that you disclose this to consumers; and
3. Identify if you have any arrangements where you receive a financial benefit for referring consumers to a third party for the purchase of goods or services. If you do, ensure that you disclose this.

Note: All contract terms must still comply with the pre-existing unfair contract provisions in NSW.