UNFAIR contracts, such as gym memberships that are impossible to cancel, will soon fall under the scrutiny of federal regulations aimed at strengthening the hand of consumers.
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The Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, Chris Bowen, will today announce the regulations as part of a new national consumer law.
The regulations will cover standard contracts. These, where the provider makes a "take-it-or-leave-it" offer of a service, are often used when people apply for a loan, sign up for TV subscriptions, or join health clubs.
An unfair contract "provides much more flexibility to one party than the other". They tended to occur when the consumer had little negotiating power, Mr Bowen said.
He said gym memberships that proved hard to cancel could fall under the law.
It was not so much a matter of making all restrictions illegal, but of ensuring the terms of contracts were fair.
It was important, Mr Bowen said, to avoid the unfairness that could occur when "one party can walk away from the contract and the other one can't".
Other examples of unfair contracts included a phone company automatically lengthening a mobile contract without consent, or a private security firm seeking to limit liability for the acts of its staff.
To enforce the regulations the consumer regulator will be given more powers. And the minister is proposing renaming the Trade Practices Act the "Competition and Consumer Act".
The Government believes unfair contracts are widespread and that their use is growing as more companies adopt standard-form contracts.
Powers extended to the Australian Competition and Consumer Commission to enforce the regulations will include fines, disqualification orders, infringement notices, and public warning notices. The commission will also be able to obtain court orders forcing companies to give redress to consumers who are not part of a particular unfair contract action.
At present the states are responsible for consumer protection through bodies such as the NSW Department of Fair Trading. In the past, states have resisted ceding their powers - including regulating product safety - to the Commonwealth and the commission.
The states will remain in charge of implementing the law.
If passed by Federal Parliament, the states will have to enact specific laws by the end of next year to implement the national consumer law.
The consumer provisions will cover all sections of the economy, except financial services.
The Australian Securities and Investments Commission will continue to take care of financial services, but the Government says it will try to ensure the regulations in this area are similar to those for the rest of the economy.
A report by the Productivity Commission last year put the potential yearly cost of consumer laws - which vary from state to state - at $4.5 billion.
Mr Bowen said changes to consumer law were long overdue. "People have been talking about this for 20 years … there has been a terrible lack of progress. One of the things I'm very pleased about is that within 12 months we got agreement."
Mr Bowen will today launch a consultation paper on the proposed Australian Consumer Law at a forum in Melbourne.