Legislative amendments to expand the meaning of ‘consumer’ under the Australian Consumer Law (ACL) came into effect on 1 July 2021, widening the scope of the ACL.
What are consumer guarantees?
The consumer guarantees (the Guarantees) within the ACL are, in essence, a set of rules that automatically apply to every supply of goods, or a service, to a consumer. In summary, under the consumer Guarantee regime, where a person or entity (a supplier) supplies “goods” to a consumer, it guarantees that the goods:
- are of acceptable quality;
- are fit for any disclosed purpose;
- are as described;
- match any sample or demonstration;
- comply with any express warranties;
- have clear title;
- are free from hidden securities or charges;
- come with undisturbed possession; and
- have spare parts and repair facilities reasonably available.
Where a supplier provides a consumer with “services”, the supplier guarantees that the services:
- will be provided with due care and skill;
- are fit for a particular purpose; and
- are supplied within a reasonable timeframe.
If a supplier fails to comply with the Guarantees, generally a consumer will be entitled to exercise their rights to request a remedy including a repair, replacement, refund, cancellation and, in some instances, compensation for any loss or damage they may have incurred as a result of the supplier’s breach of the Guarantees.
What are the new amendments to the ACL?
The Guarantees only apply to goods and services purchased by a person or entity that meets the definition of consumer in the ACL.
Previously, a consumer was defined as person or entity that purchases:
- Goods or services of up to $40,000; or
- Goods or services above $40,000, but of a kind ordinarily acquired for domestic or household use or consumption; or
- A vehicle or trailer for use principally in the transport of goods on public roads.
The $40,000 monetary threshold was introduced some 35 years ago in 1986 and had not been updated since then to reflect inflation. Following a recent review of the ACL by Consumer Affairs Australia and New Zealand (ACL Review), it was found that the level of protection afforded to consumers had eroded over time due to inflation in the costs of goods and services. This meant that certain consumer purchases which were once covered by the ACL were no longer covered due to the monetary threshold being too low. The ACL Review resulted in a proposal to increase the monetary threshold to $100,000.
As such, the Treasury Laws Amendment (Acquisition as Consumer – Financial Thresholds) Regulations 2020 (Cth) brought the ACL Review recommendation into effect, broadening the scope of the ACL which had diminished over the past 35 years.
The legislative amendments mean that the ACL now covers transactions for the following three categories:
- Goods or services acquired for under $100,000;
- Goods or services acquired for over $100,000 and normally acquired for personal, domestic or household use; and
- The acquisition of vehicles or trailers that are mainly used for transporting goods.
For example, the new monetary thresholds now mean that a business which has purchased defective goods for a purchase price of $50,000 can rely on the rights and remedies afforded to it by the consumer Guarantee regime.
What is the overall effect of the changes?
The changes to the ACL are significant as they result in the ACL now providing a wider range of individuals and businesses with protection, and access to the rights and remedies, under the consumer Guarantee regime.
The amendments also have the effect of increasing the threshold amount in the Australian Securities and Investments Commission Act 2001 (Cth), which contain similar consumer protection provisions that mirror the ACL but with respect to the supply of financial products and services.
Businesses should update their supply contracts and terms and conditions to reflect the recent amendments to the ACL and so as to ensure that they do that contain any terms that may no longer be applicable. Any terms that purport to exclude, waive or limit the Guarantees will be void and unenforceable.
The legislative amendments to the ACL mean that the Guarantees now apply to transactions for goods or services of up to $100,000, in addition to household goods and commercial vehicles above that amount.
This means that businesses that may previously have fallen outside of the scope of the ACL are now potentially exposed to increased liability for claims by customers.
The Business & Commercial Services team at Wisewould Mahony has extensive experience with ACL disputes between consumers and suppliers, and preparing and updating terms and conditions to reflect recent changes in legislation.