New consumer laws will be in effect to protect more consumers across Australia.
The Australian Consumer Law (ACL) is the main body of law that protects consumers who buy goods and services from businesses across Australia.
And, now, even more consumers are going to be able to access the ACL’s protections. This is because the ACL’s definition of a “consumer” is changing.
Previously, the ACL defined a “consumer” as anyone who purchases goods or services under $40,000. Under new changes to the law, this number will be increased to $100,000.
This means that a lot more consumers across Australia will have rights and entitlements under the ACL, so businesses need to understand their obligations to consumers.
These new consumer laws will take effect from 1 July 2021, giving businesses a significant amount of time to prepare.
So, what does this change actually mean for businesses in Australia?
In this article, we’ll walk you through the laws and what it could mean for your business.
A Quick Lesson On The Australian Consumer Law
Confused about what the Australian Consumer Law is?
The ACL covers both consumers and businesses across Australia. It addresses a wide range of areas like refunds, returns and exchanges, misleading and deceptive conduct, spam, resale prices, and plenty more.
Business owners have to comply with the standards and expectations set out in the ACL. Consumers have rights to take action against businesses if those standards aren’t met.
All businesses (including overseas businesses who sell to consumers in Australia) must comply with the ACL.
How Does The Law Define “Consumer”?
For a business’ customers to actually be entitled to any rights under the ACL, they must meet the legal definition of “consumer”.
Currently, Section 3 of the ACL defines a “consumer” as anyone who purchases goods or services that are:
- under $40,000
- typically used for personal, domestic or household purposes
If a person satisfies that definition of a “consumer”, they are entitled to the rights and obligations under the ACL that expressly refers to consumers, including consumer guarantees.
Consumer guarantees are the minimum standards that businesses and manufacturers are expected to meet when they sell goods or services to consumers.
For example, if you’re hiring out party equipment for household parties, you are required under the ACL to ensure that the equipment is fit for its intended purpose. If it’s not, then the consumer will be entitled to a “remedy”. This could include a repair, replacement or refund.
So, if a person buys goods and services that satisfy the definition of a “consumer” under the ACL, they are entitled to a remedy if a business does not meet its consumer guarantees.
A full list of the consumer guarantees that businesses must comply with is here.
How Is The Definition Of “Consumer” Changing?
As discussed above, the ACL has defined a consumer as someone who purchases goods worth up to $40,000. This $40,000 limit was introduced in 1986. The rationale was that any goods or services above that amount would typically be used for business purposes.
For example, a business installing industrial air conditioning in a factory wouldn’t be seen as a “consumer” for the purposes of the ACL. Typically, there would be a B2B contract between the two businesses, which would set out a process for defects and refunds. And, as their customers won’t have a right to a remedy for not meeting ACL standards, the terms can be more favourable towards the business offering the goods or services.
New changes will see the monetary threshold increased from $40,000 to $100,000 from 1 July 2021. These changes have been introduced by the Treasury Laws Amendment (Acquisition as Consumer – Financial Thresholds) Regulations 2020.
The changes mean that anyone in Australia who buys goods or services up to $100,000 will be entitled to a remedy if the business does not meet the consumer guarantees. The changes will give more consumers across Australia rights under the ACL.
What Does This Mean For My Business?
If your business sells goods or services under the $40,000 limit, this change won’t affect you (as the consumer guarantees still apply to you either way).
However, if you’re currently selling goods or services over $40,000, you need to make sure you’re prepared for the new changes, because consumers will have more rights if your goods or services do not meet the consumer guarantees.
Here’s how to prepare:
- Make sure your customer contracts comply with the consumer guarantees
- Update your refunds/return policies
- Understand your obligations when a consumer requests a remedy
These changes will take effect from 1 July 2021, which gives businesses plenty of time to make sure they’re prepared.
Regardless of whether your consumers have a right to claim a remedy under the consumer guarantees, you must still comply with the rest of the ACL. For example, the ACL prohibits all businesses from misleading and deceptive conduct, or from imposing unfair contract terms.
What Do I Do Now?
If these new changes affect you, we suggest that you speak with a lawyer to understand your obligations to meet consumer guarantees and ensure that your contracts comply with them.
Whether or not these changes affect you, it’s likely that the consumer guarantees still apply to your business. If you’re not sure how they work, we’ve written about them here.
The ACL is constantly changing. For example, in 2019, mandatory wording was introduced for additional warranties.
It’s important to keep up with these changes to the ACL and to be aware of how your obligations to consumers may evolve as a result. To check whether your business is compliant with the ACL, or for any other consumer law questions, reach out to our friendly team for a free chat on 1800 730 617 or at email@example.com.
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