Important New Disclosure Requirement for Businesses

Recent changes to the Fair Trading Act 1987 have seen the introduction of new disclosure obligations for operators of NSW businesses. NSW business operators must now, before supplying goods or services to consumers, take reasonable steps to ensure the consumer is aware of the substance and effect of any terms or conditions of contracts that substantially prejudice the consumer. This includes any terms that:

  • limit the supplier’s liability;
  • place liability on the consumer for damage to goods that are delivered;
  • permit the supplier to provide data about the consumer (or that the consumer has provided) to a third party which would permit that third party to identify the consumer; and
  • require payment of an exit fee or balloon payment.

This is not an exhaustive list however, so business operators should review their engagement documents to identify any other terms that may substantially prejudice the consumer. 

Similarly, an intermediary (such as an agent or referrer) must before acting under any arrangement (which can be formal or informal) that provides for financial incentive take reasonable steps to ensure the consumer who will be supplied with goods or services is aware of the existence of the arrangement. The Act does not require the intermediary to disclose the content of the arrangement such as the value of the commission or referral fee payable. 

The reasonable steps a business should adopt to comply with these obligations will differ depending on the type of business and the manner in which they engage with consumers but can include:

  • providing a summary of the relevant clauses on the front page of the contract for signing by the consumer; 
  • using pop up screens or scrollable text boxes during online engagement; or 
  • using automatic disclaimers of commission/referral arrangements on quotations or emails.

The changes will affect any business supplying goods or services to a consumer, or an intermediary dealing with a consumer, as defined in the Australian Consumer Law.

The changes came into effect on 1 July 2020, however NSW Fair Trading has indicated it will not penalise businesses for failing to comply for the period of 6 months to 31 December 2020, to give businesses time to ensure their operations are updated. Businesses must be seen to be taking appropriate steps to implement changes where required. 

If you have any questions regarding the above or require assistance to review your engagement process and develop protocols to ensure that you are complying with these new obligations please contact our Commercial Team on (02) 4927 2900.