24 Nov 2010

Knock knock, ring ring - who's there? A new regulatory regime for door-to-door and telephone sales

by Xuelin Teo, Evelyn Tadros

If you use unsolicited sales techniques, you should review your sales agreements and practices to ensure compliance with the new Australian Consumer Law.

From 1 January 2011, unsolicited door-to-door and telephone sales will be subject to uniform regulation across Australia. Those who engage in unsolicited selling should review their current practices and agreements to ensure that they comply with the new Australian Consumer Law.

Unsolicited selling is currently regulated by State and Territory legislation. From 1 January 2011, these laws will be replaced by the Australian Consumer Law, which will be a Schedule to the new Competition and Consumer Act 2010 (Cth), the new name for the Trade Practices Act 1974 (Cth). The Australian Consumer Law will apply to telephone sales to the extent that they are not already covered by other Commonwealth legislation, such as the Do Not Call Register Act 2006 (Cth).

What practices are affected?
The new laws will apply to unsolicited door-to-door and telephone sales practices and the formation of unsolicited selling agreements worth more than $100, or amounts not ascertainable at the time of agreement (such as those dependent on consumption).

A sale is still considered to be unsolicited if the consumer provides their contact details for another purpose (such as a competition), returns a missed call, or simply asks for a quote. Agreements reached as a result of such practices are referred to as "unsolicited consumer agreements".

Who do the new laws apply to?
The new laws will apply to those who enter into negotiations with consumers (dealers), whether or not they are also the suppliers of the goods or services. Certain provisions will also apply to suppliers who are not dealers (suppliers who engage third parties to sell their goods or services).

When can door-to-door sales be made?
Dealers may contact potential customers only during certain times: 9am to 6pm from Monday to Friday and 9am to 5pm on Saturday. Contact cannot be made on public holidays.

Dealers must advise upfront the purpose of their visit, their identity and their obligation to leave immediately upon request. They must leave immediately upon request and not contact the consumer for at least 30 days after the request to leave.

Contact times for telephone sales are regulated by the Telecommunications (Do Not Call Register) (Telemarketing and Research Calls) Industry Standard 2007.

Information before the sale
Before making an unsolicited consumer agreement, consumers must be given information about their right to terminate during the termination period and how that right may be exercised.

Suppliers must ensure that unsolicited consumer agreements contain certain information prescribed by the legislation, such as the inclusion of a notice on the front page that informs the consumer of their right to terminate and particular contact details of the supplier, and a notice which the consumer may use to terminate the agreement.

Dealers must provide consumers with the agreement in writing, either immediately (for door-to-door sales) or within five business days (for telephone sales) after the agreement was made. Any amendments must be signed by both parties.

A cooling-off period
A 10-day cooling-off period applies to unsolicited consumer agreements during which suppliers must not require or accept payment nor supply the relevant goods or services. This period starts on the first business day after the agreement was made (for door-to-door sales) or after the consumer was given the agreement (for telephone sales). If supply is made during the cooling-off period, the consumer does not have to pay for the goods or services.

The consumer's right to terminate
A consumer may terminate the agreement within set time periods. In general, this period will be 10 business days. However, longer termination periods will apply if certain provisions of the new laws are contravened (three- or six-month termination periods will apply depending on the nature or type of contravention) or the agreement provides otherwise.

A termination has effect even if the goods or services have been wholly or partly consumed or used - although a supplier would only find itself in this position where longer termination periods apply, as they should not have supplied any goods or services within the 10 day cooling-off period, as discussed above.

Upon termination within a relevant termination period, the supplier must refund any moneys paid by the consumer and the consumer must return or make available for collection any goods not already consumed. If a consumer terminates the agreement after the prescribed termination period, the consumer must pay compensation to the supplier for damage to or depreciation of goods that have been supplied or pay for services that have been supplied.

What are the ramifications for breach?
Apart from dealers and suppliers facing criminal penalties and civil pecuniary penalties of up to $50,000 (for corporations), suppliers who contravene the new laws (no matter how seemingly trivial), cannot enforce the relevant agreement against the consumer.

Draft regulations
On 24 September 2010, the draft regulations for the Australian Consumer Law (the Competition and Consumer (Australian Consumer Law) Amendment Regulations 2010) were released for consultation.

It proposes requirements for information that dealers are required to give to consumers (for example, identity information, text for the front page of each agreement).

It also proposes to exempt agreements made in the course of party plan events (for example, Tupperware home parties), business contracts, renewal of contracts of the same kind (such as for the supply of electricity or renewal of gym membership) and unsolicited emergency repair contracts (for example, repairs to roofing after a cyclone).

What should you do?
The new laws provide uniformity across Australia when it comes to drafting, negotiating and enforcing unsolicited consumer agreements. These laws cannot be contracted out of. Suppliers and dealers who employ unsolicited sales techniques should review their sales agreements and practices to ensure compliance with the new laws.

Dealers who engage in negotiations with consumers must be educated about and comply with the new regime, otherwise they will place themselves (and their suppliers) at risk of breaching the Australian Consumer Law, in which case the dealers will be vulnerable to pecuniary penalties and the suppliers will not be able to enforce the unsolicited consumer agreements.

It will also be important to monitor the regulations which are made in respect of unsolicited consumer agreements from time to time.

Related Knowledge

Get in Touch

Get in touch information is loading

Disclaimer

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.