EDITORIAL WEDNESDAY 18.02.09.
The Federal Government is in the process of putting together national consumer laws which are intended to achieve both consistency between the states, and a better deal for consumers. Such a national code is only possible with the agreement of the states, and will require them to enact their own legislation to bring the national code into effect. When that finally happens it will reduce the cost burden on businesses complying with half a dozen separate jurisdictions with their own separate sets of laws. It will also provide consumers with greater clarity on just what are their rights.
The new code will include a set of regulations for so-called standard contracts, announced this week by the Assistant Federal Treasurer Chris Bowen. Essentially, a standard contract is a form contract which is imposed upon a consumer with a standard set of terms and conditions which the customer must sign in order to receive the service or goods on offer. The use of the standard contract has spread throughout many aspects of modern life, and one of the most obvious examples is the mobile phone contract. It’s no coincidence that the mobile phone contract is also one of the biggest sources of complaints from consumers. Another big source of complaint is the area of gym membership contracts.
The difficulty is that many standard contracts are to some extent one sided. A common problem is for customers to be unable to get out of a contract in the event that their circumstances change, or sometimes even when the service provider is no longer able to provide the service. In extreme cases, the service provider is allowed by the terms of the contract to actually change the terms of the contract unilaterally, or to extend it, without any further negotiation or agreement required.
Although it can be said that consumers should read the fine print and be aware of just what it is that they are signing, the truth is that the contracts are offered on a take it or leave it basis. If you want to have the mobile phone at the advertised price, you have no choice but to sign the papers. If you want to join the gym in your suburb, you have no choice but to accept their terms and conditions. And although it should make good business sense to offer customers good terms, that hasn’t always proven to be the case.
While the move to regulate standard contracts to ensure that they are fair is long overdue, the success of the plan depends upon what is considered to be fair and who decides whether or not it is. This task will be left to the Australian Competition and Consumer Commission, which will be given new powers to enforce the code, as well as the courts. There is however one exception. Financial services. This area is already the domain of a Federal Agency, the Australian Securities and Investments Commission.
It remains to be seen whether the same principles of fairness will be applied to loan contracts, but it certainly should be. Buried within most mortgage contracts is a clause which gives the bank the power to independently and unilaterally alter any of the terms and conditions of the loan, including the level of any fees, at any time. When you sign such a contract, how can you possible know what it is that you are agreeing to? That’s not a contract, that’s an ultimatum! You might as well be handing over a blank cheque. No wonder most of us feel as if we are signing over our soul when we take out mortgage!
While we tend to think of a contract as a negotiated agreement, the truth is that most of us have no say in almost every contract we sign. That’s why it is imperative for consumer protection laws to provide the balance which is missing in the market place.