Monday, August 18, 2008

Customer Contracts Can Be A One Way Street

The various states and territories of Australia have reached an in principle agreement to introduce uniform consumer protection laws across the nation. At present, each state and territory has its own structure, as well as the Commonwealth provisions under company law. It’ a lot of red tape for businesses to contend with, but also a lot for consumers to understand when their rights might vary from state to state. Putting all the jurisdictions onto an equal footing will obviously achieve a more efficient system. But there is more to the discussion than simply uniformity.

Also on the agenda is the question of unfair contract conditions imposed upon captive consumers who must sign a document in order to obtain the service they wish to buy. Once upon a time the only contract we would sign would be a mortgage with our bank. Now we must sign on the dotted line for a phone service, the internet, our electricity, gym memberships, and more. Pretty soon you’ll need a contract to go shopping at your local supermarket.

The problem with all of these contracts is that some of them contain clauses which are inherently unfair, such as the ability of a service provider to unilaterally alter the terms and conditions at any time. Or the requirement for fees or charges to be paid should the customer have the temerity to want to make a change of some sort. Or a clause which removes liability for any interruption to service. In many cases these contracts were introduced as a way of retaining customers and providing some security of income. There’s nothing wrong with that, but it would appear that the opportunity has been taken to draw up contracts which are essentially a one way street.

In my view, any contract which includes a clause which allows the service provider to unilaterally change the terms and conditions at any time isn’t really a contract. As a customer, you have no recourse if you believe you have been treated unfairly.
Even more alarming is the fact that most mortgages contain exactly that clause. When you sign up you might accept that you are committing to a variable rate of interest, but deep in the fine print there can also be the clause which allows the bank to change any terms and conditions it likes at its own discretion.

There’s a lot more to this reform of consumer protection than just cutting red tape. It is also an opportunity to give all of us as consumers the right to a fair go.

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