Fair Trading Laws Relating To Telemarketing in New South Wales and Victoria
Options For Harmonisation
August 2005
Contents
INTRODUCTION ........................................................................................... 3 THE LEGISLATION........................................................................................ 4 POLICY INTENT .................................................................................................. 4
NEW SOUTH WALES ............................................................................................ 5 VICTORIA ......................................................................................................... 5 SCOPE OF HARMONISATION ................................................................................... 5 ISSUES ......................................................................................................... 6 1. APPLICATION OF LEGISLATION ............................................................................ 6 2. REQUIREMENT OF EXPLICIT INFORMED CONSENT .................................................... 7 3. COOLING-OFF PERIOD ...................................................................................... 8 4. RESTRICTED CALLING HOURS ........................................................................... 10 5. EXEMPTIONS ................................................................................................ 12
Information asymmetry ................................................................................ 4 High pressure sales techniques...................................................................... 4 Access to post-sale remedies......................................................................... 5 Attachment One outlines the regulatory regime for direct commerce. ............... 5 Attachment Two outlines the regulatory regime for telephone marketing agreements. ................................................................................................ 5
(a) Credit contracts .................................................................................... 12 (b) Charitable Fundraising Appeals .............................................................. 13 (c) Classified Advertising ............................................................................. 14
ATTACHMENT ONE ..................................................................................... 17 ATTACHMENT TWO .................................................................................... 21
Introduction
On 30 August 2004 laws to regulate the practice of selling goods and services through outbound telephone marketing, known as „telemarketing‟, came into operation in New South Wales and Victoria. Each State amended its Fair Trading Act in accordance with recommendations of a legislative review report.1 Although the policy framework underpinning the new laws is based on similar principles, specific statutory requirements differ. Before commencement the former Victorian Minister for Consumer Affairs, John Lenders MP, announced that the Bracks Government had commenced the process of harmonising the Victorian and New South Wales telemarketing laws by aligning the threshold for the application of the regime with that applying under the NSW regime, namely $100. Mr Lenders said a clearly defined regulatory framework between the States would assist companies operating across borders and provide greater protection for consumers and that a working party of Victorian and NSW officers had been established to review the options for further harmonisation. „Harmonisation‟ involves the alignment of laws, rules and processes to promote consistency in their application and outcomes, and to remove inconsistent or contradictory requirements. As part of the harmonisation project, the NSW and Victorian governments developed consistent exemption regulations, which came into effect on 30 August 2004. This paper, prepared by the harmonisation working party, identifies inconsistent or contradictory requirements and outlines options for promoting further harmonisation. Comment is sought on the options canvassed in this paper. Submissions may be sent to: New South Wales Project Manager Telemarketing Law Harmonisation Policy & Strategy Division PO Box 972 PARRAMATTA NSW 2124 Fax: (02) 9338 8929 Email: policy@oft.commerce.nsw.gov.au Victoria Telemarketing Harmonisation Working Group Consumer Affairs Victoria (Program Development & Evaluation) GPO Box 123A MELBOURNE VIC 3001 Fax: (03) 96276133 Email: telemarketing@justice.vic.gov.au
The closing date for submissions is Friday 14 October 2005.
1
In New South Wales, the Report of the National Competition Policy Review of the Fair Trading Act 1987 and Door-to-Door Sales Act 1967 (April 2002) and in Victoria, the Report of the Fair Trading Act Review Reference Panel (June 2002) and the supplementary Report of the Fair Trading Act Review Reference Panel - Telemarketing (June 2003).
3
The Legislation
Policy Intent
Telemarketing is an unsolicited and often intrusive form of selling that closely resembles door-to-door selling. The objective of legislation to regulate telemarketing is to foster a fair and efficient marketplace and provide appropriate consumer protection by: reducing information asymmetry so that consumers may make informed decisions; reducing the incidence and effectiveness of high-pressure sales techniques; and providing access to post-sale remedies. Information asymmetry Consumer purchasing decisions occur with reference to information available to the consumer, much of which is provided by the trader. Provided that this information is truthful and provided that consumers are in a position to properly evaluate it, they are generally able to select products and services which meet their requirements. In some situations, however, there is greater likelihood that the decision-making process will be constrained and that this will result in systematically poor consumer choices. In the case of telemarketing, for example, the consumer is unlikely to have engaged in a product comparison prior to the unsolicited approach of the trader and so the decision-making context available to the consumer is largely that which is represented to them by the trader. Information asymmetry and/or information deficiency compromises the ability of consumers to make the best consumption choices in view of their limited purchasing power. A statutory cooling-off period gives consumers the opportunity to obtain adequate information about the goods or services being sold by telemarketing, or to access information about the price and quality of similar products, in order to make informed decisions. The legislation essentially allows consumers to reconsider a purchase that they may not otherwise have made. High pressure sales techniques High pressure sales techniques, which are sometimes employed and which take advantage of the unequal market power of the participants in an unsolicited telemarketing transaction, exacerbate the problem of information asymmetry. These sales techniques may involve: misleading representations or lack of disclosure of important information; inter-personal pressure exerted by sales people on the telephone, particularly if the trader contacted the consumer by telephone through a database list and referred to the consumer by name; and targeting vulnerable consumer groups, including the elderly, consumers with poor understanding of English and the disadvantaged. Apart from the general prohibitions on misleading, deceptive and unconscionable conduct in the NSW and Victorian Fair Trading Acts, the NSW and Victorian legislation includes a number of specific measures to address these issues:
4
the right to cancel the contract during a cooling-off period, together with a requirement that consumers must be informed in writing about the cooling-off period and their right to cancel the contract. Failure to do this is an offence and the contract is unenforceable; the prohibition on collecting fees for services during the cooling-off period; the restrictions on hours of calling; and the prohibition on telephoning again within 30 days if requested to cease negotiations.
Access to post-sale remedies An effective consumer protection regime requires that consumers have access to remedies should problems occur. A fair marketplace requires that traders also have remedies in certain circumstances.
New South Wales
The Fair Trading Amendment Act 2003 amended the Fair Trading Act 1987 (the NSW Act) to insert a new Division 3 of Part 4 to regulate direct commerce contracts. These may be door-to-door sales or telemarketing contracts. The Fair Trading (General) Amendment (Direct Commerce) Regulation 2004 and the Fair Trading (General) Amendment (Direct Commerce Exemptions) 2004 amended the Fair Trading (General) Regulation 2002 (the NSW Regulation) to provide for exemptions from the direct commerce provisions. Attachment One outlines the regulatory regime for direct commerce.
Victoria
The Fair Trading (Further Amendment) Act 2003 inserted a new Division 2A of Part 4 of the Fair Trading Act 1999 (the Victorian Act) to regulate telephone marketing agreements. The Fair Trading (Consumer Contracts) Act 2004 increased the monetary threshold for telephone marketing agreements to $100. The Fair Trading (Amendment) Regulations 2004 and Fair Trading (Further Amendment) Regulations 2004 amended the Fair Trading Regulations 1999 (the Victorian Regulation) to provide for exemptions from the telephone marketing agreement provisions. Attachment Two outlines the regulatory regime for telephone marketing agreements.
Scope of harmonisation
Although uniform legislation for telemarketing would achieve maximum harmonisation, it would inevitably involve internal inconsistency for each State's Fair Trading Act and would be especially difficult for NSW because its "direct commerce" regime covers both door-to-door selling and telemarketing, whereas Victoria has separate regimes.
5
It is therefore proposed to seek agreement on consistent provisions for those requirements where: differences have a significant impact on the costs to business of complying with laws in both jurisdictions; and the benefits to consumers are outweighed by the costs of compliance. The harmonisation working party has identified the following issues as fitting into this category.
Issues
1. Application of legislation
New South Wales There is no explicit definition of „telemarketing‟ in the NSW Act. Section 40B defines the elements of a direct commerce contract, including that: negotiations leading to the making of the contract (whether or not they are the only negotiations that precede the making of the contract) take place between the dealer and the consumer over the telephone; and the consumer did not invite the dealer to make that telephone call for the purpose of entering into those negotiations. The words „whether or not they are the only negotiations that precede the making of the contract‟ are included to ensure that unscrupulous dealers cannot avoid the direct commerce provisions by making an uninvited telephone call and persuading the consumer to make an appointment to carry out the negotiations at home. These words have been interpreted by some industry participants very broadly to include all contracts that have incorporated the use of the telephone as part of the negotiation process, regardless of the time that elapses before a contract is made. Such an interpretation extends the NSW Act to situations where the consumer has had time to reconsider a decision, seek advice and shop around before entering a contract. This is not the policy intent of the legislation. Victoria Section 67A(1) of the Victorian Act defines the elements of a „telephone marketing agreement‟, including that: negotiations leading to the making of the agreement (whether or not they are the only negotiations that precede the making of the agreement) take place between the supplier or a person acting on behalf of the supplier and the purchaser over the telephone; and the initial telephone call for the purpose of entering into the negotiations was made by or on behalf of the supplier. Section 67A(2) relevantly qualifies the definition by excluding an agreement if: the purchaser invited the supplier or a person acting on behalf of the supplier to make that initial telephone call (including by prior written consent of the purchaser); or
6
after that initial telephone call, the purchaser telephoned the supplier or a person acting on behalf of the supplier to continue the negotiations.
Comment The Victorian Act makes it clear that agreements made as a result of „call backs‟ (a person telephoning a supplier to continue negotiations after receiving a telephone call) are not covered by the telemarketing law. The NSW Act does not address „call backs‟, although it is not the policy intent of the legislation that contracts made in this way be covered. Proposed action The NSW Regulation could be amended to clarify that sections 40C-40H and 40K of the NSW Act do not apply to contracts made after the prospective consumer telephoned the dealer or supplier to continue negotiations begun during a telephone call made in the course of direct commerce. This means such contracts would not have to comply with the cooling-off provisions and related requirements.
2. Requirement of Explicit Informed Consent
New South Wales The NSW Act does not contain any rules about explicit informed consent. Victoria Section 67D of the Victorian Act introduces the concept of „explicit informed consent‟. A telephone marketing agreement is void unless the purchaser has, prior to the agreement being made, given explicit informed consent to the supplier. „Explicit informed consent‟ means consent must be given: by the purchaser directly to the supplier in writing or orally; and if given orally, must be recorded by the supplier in writing or, with the prior consent of the purchaser, by means of a recording device; and only after the supplier has disclosed all matters relevant to the consent of the purchaser. Comment The "explicit informed consent" requirement comes from the Victorian energy retail codes where its primary purpose is to counter the practice of "slamming" in the energy industry (falsely or tenuously asserting that the consumer agreed to switch suppliers) and to satisfy the original supplier that it had legitimately lost the account. Its primary function in the telemarketing regime is to ensure that consumers are fully informed before consenting and that their consent is not merely inferred by suppliers. However, given that consumers must be sent a written copy of the contract and can cancel any contract forwarded to them to which they did not really consent or about whose terms they were not properly informed, its effective function
7
is to assist consumers who did not consent to the sale but did not exercise their cooling-off right within the 10 days provided. The Victorian requirement imposes extra compliance costs on industry and is not replicated in the NSW Act. To this extent the Victorian requirement is inconsistent with the NSW regime.
Options for action
Do nothing.
While the Victorian requirement is inconsistent with the NSW regime, it does not impose a contradictory requirement, and interstate operators could choose to conduct their business in both States by seeking “explicit informed consent”, thus not breaching either State‟s law, although the calls to NSW consumers would entail extra costs, which would have to be absorbed or passed on. NSW adopts an “explicit informed consent” requirement. This would require legislative amendment.
This would achieve consistency but the extra costs it would impose on industry could be difficult to justify given that if consumers do not give “explicit informed consent” they are still protected by the cooling off right. Victoria removes the “explicit informed consent” requirement. This would require legislative amendment.
This would achieve consistency. Balancing the marginal extra consumer-protection provided by the "explicit informed consent" requirement with the costs it entails, it could be more beneficial, in the interests of interstate trading, for Victoria to remove its "explicit informed consent" requirement.
3. Cooling-off period
New South Wales The NSW Act provides for a cooling-off period during which a consumer may cancel a direct commerce contract made over the telephone. Section 40D provides that before the contract is made, the consumer must be given information about the consumer‟s right to cancel the contract during the cooling-off period and the manner in which that right may be exercised. This information must be given over the telephone and subsequently in writing. Section 40E provides that the consumer may cancel the contract by giving written notice of the cancellation to the supplier within the period commencing on the day the contract was made and ending five clear business days from the day on which the cooling-off information is given to the consumer in writing. The contract may provide for a longer cooling-off period.
8
Victoria The Victorian Act provides for a cooling-off period during which a consumer may cancel a telephone marketing agreement. Section 67D(8) provides that the supplier must not enter or purport to enter into a telephone marketing agreement unless the supplier has, during the telephone negotiations which led to the agreement, advised the purchaser of the right to cancel the agreement during the cooling-off period. Section 67E provides that within 5 days after making the agreement, the supplier must serve on the purchaser an agreement document and cancellation notice which comply with the requirements of the Victorian Act with respect to content and format. Section 67H provides that a purchaser may cancel a telephone marketing agreement by giving notice of cancellation to the supplier within 10 days from and including the day on which the purchaser receives the agreement document and cancellation notice. The agreement may provide for a longer cooling-off period. Comment Both states require that telemarketers inform potential customers about the coolingoff period on the telephone and provide their customers with written information about their right to a cooling-off period and how to exercise it, although the Victorian requirements are more prescriptive. The cooling-off period is not consistent. New South Wales allows cancellation a clear five business days after the written information is received. In Victoria cancellation is permitted within 10 (ordinary) days from and including the day the written information is received. As an example, a NSW consumer who receives the written information on Monday may cancel the contract at any time up to and including the Monday of the following week. A Victorian purchaser who receives the written information on the same day may cancel up to and including Wednesday of the following week. Options for action Do nothing
Although the cooling-off periods are inconsistent, interstate operators could choose to conduct their business in both states by offering a consistent cooling-off period that meets Victoria‟s requirements and exceeds NSW requirements. This may be considered to place them at a competitive disadvantage with businesses operating only in New South Wales, although consumers may prefer the longer cooling-off period.
9
New South Wales increases the cooling-off period to be consistent with Victoria. This would require a legislative amendment.
This would make telemarketing contracts inconsistent with other direct commerce (that is, door-to-door selling) contracts unless both cooling-off periods were increased to 10 days. However, New South Wales reduced the cooling-off period from 10 days to 5 clear business days in 2003 on the recommendation of the National Competition Policy Review. Victoria reduces the cooling-off period to be consistent with New South Wales. This would require a legislative amendment.
This would make telephone marketing agreements inconsistent with contact sale and non-contact sale agreements unless all cooling-off periods were reduced to 5 clear business days. However, Victoria increased the cooling-off period from 5 clear business days to 10 days in 2003 on the recommendation of the Fair Trading Act Review Reference Panel. Both Victoria and New South Wales amend their cooling-off periods to a compromise period of 8 days from and including the day the written information is received. This would require a legislative amendment in both States.
In the example given above, if the written information is received on Monday, consumers in both States may cancel the contract/agreement at any time up to and including the Monday of the following week. While this would achieve consistency between the States‟ telemarketing regimes, it would still make for some internal inconsistency within the respective Acts regarding other agreements attracting a cooling-off right, unless they were also aligned to 8 days.
4. Restricted calling hours
New South Wales Section 40I of the NSW Act provides that a dealer must not telephone a consumer for the purpose of negotiating a direct commerce contract between the hours of 8 pm and 9 am seven days a week, unless the dealer has made a prior appointment. Victoria Section 67C of the Victorian Act provides that a telemarketer must not contact a person for the purpose of negotiations which may lead to a telephone marketing agreement at any time on a public holiday; or between the hours of 5 pm and 9 am on a Saturday or a Sunday; or between the hours of 8 pm and 9 am on any other day. Comment The restrictions on calling hours are not consistent. Further, the NSW law is the same for both telemarketing and door-to-door selling, whereas in Victoria, slightly different hours apply to telephone marketing and contact sales (that is, door-to-door sales) in that contact selling is not permitted on Sundays.
10
Options for action Do nothing.
Although the restrictions on calling hours are inconsistent, interstate operators could choose to conduct their business in both states by telemarketing during the hours permitted by Victoria. This would ensure they were also in compliance with NSW law. This may be considered to place them at a competitive disadvantage with businesses operating only in New South Wales, although consumers may prefer the more restricted hours. New South Wales changes the calling hours to be consistent with Victoria. This would require a legislative amendment.
This would also require an amendment to permitted hours for door-to-door selling to avoid inconsistency between the two forms of direct commerce. However, New South Wales introduced the current restricted hours in 2003 on the recommendation of the National Competition Policy Review. Victoria changes the calling hours to be consistent with New South Wales. This would require a legislative amendment.
This would not necessarily require an amendment to permitted hours for contact sales (door-to-door selling) and there is already some inconsistency between telemarketing and contact sales hours. Both New South Wales and Victoria change their calling hours in line with the Direct Marketing Model Code of Practice prepared by the Ministerial Council on Consumer Affairs (September 2003).
The Model Code provides that without a consumer‟s consent, a telemarketer shall not call: On Sundays; On the following public holidays: New Year‟s Day Australia Day Good Friday Easter Monday Anzac Day Christmas Day Boxing Day; Between the hours of 9pm and 8am on any other day. Industry associations whose members are involved in direct marketing are encouraged to establish their own codes based upon the provisions contained in the Model Code. Any such code would be a voluntary code. While this would achieve consistency between the States‟ telemarketing regimes, it would still make for some internal inconsistency within the respective Acts regarding door-to-door selling hours unless they were also aligned with the Model Code hours.
11
It should be noted that the National Competition Policy Review in New South Wales considered but did not support the hours in the Model Code.
5. Exemptions
(a) Credit contracts New South Wales Clause 88C (a) of the NSW Regulation exempts credit contracts within the meaning of the Consumer Credit (New South Wales) Code from sections 40C-40H and 40K of the Act. This means consumer credit contracts do not have to comply with the cooling-off provisions and related requirements. However, dealers or suppliers who telephone prospective consumers for the purpose of entering into negotiations for a consumer credit contract do have to comply with the restricted calling hours and 30 day „no call back‟ rule. Although the Consumer Credit Code does not provide a cooling off period, the debtor can cancel a credit contract before credit is provided. The Information Statement, which must be given to the prospective debtor, notifies that person of this cancellation right. Further, credit contracts must be in writing. If the consumer was telephoned and agreed to consider an offer by the credit provider, eg for a credit card, the contract would still have to be in writing and signed by the credit provider and accompanied by the Information Statement and other pre-contractual disclosure material. Victoria Section 67A(5) of the Victorian Act provides that an agreement solely for the provision of credit, a contract of guarantee and a mortgage are not telephone marketing agreements. Comment The treatment of consumer credit products is inconsistent. In New South Wales consumer credit providers have a partial exemption from the direct commerce laws for Consumer Credit Code credit agreements. In Victoria there is a complete exemption from the law relating to telephone marketing agreements, except where an agreement is not solely for the provision of credit, for example an agreement for the provision of a credit card facility plus travel insurance, in which case the telemarketing of the credit card facility is covered both by the telemarketing regime and the relevant provisions of the Consumer Credit Code. Options for action Do nothing
Although the treatment of consumer credit products is inconsistent, interstate credit providers could choose to conduct their business in both states by complying with the NSW Act. This may be considered to place them at a competitive disadvantage with businesses operating only in Victoria, although consumers may prefer the increased consumer protection.
12
New South Wales amends the NSW Regulation to align with the Victorian Act and provide a complete exemption for credit contracts (whether or not solely for the provision of credit) and associated guarantees and mortgages
Section 146 of the Consumer Credit Code prohibits canvassing of credit at home, except by prior arrangement. There is no prohibition on telemarketing of credit, largely because the Code was enacted before the growth of this particular marketing method. If a complete exemption was provided, there would be no constraint on the hours credit providers could call or the frequency of calling. Victoria confines its exemption to align with NSW, ie the exemption would only apply to contracts within the meaning of the Consumer Credit (Victoria) Code and only to the cooling-off provisions and related requirements. This would require legislative amendment.
This would allow for consistency between the regimes on the treatment of consumer credit contracts and would somewhat broaden the protection for Victorian consumers in that the exemption would only be partial and in that contracts (and associated guarantees or mortgages) that are not governed by the Code would remain fully regulated by the telemarketing regime. Victoria and NSW remove their exemptions. This would require an amendment to the Victorian Act and an amendment to the NSW Regulation.
The Victorian exemption mirrors that in its existing contact-selling (door-to-door) regime (the Fair Trading Act Review Reference Panel recommended that the telemarketing regime be based on the contact-selling regime). Removing the exemption for credit contracts would mean that consumers would get all the protections provided by the telemarketing regimes, including the cooling-off right and related provisions. However, the Consumer Credit Code provides for equivalent protection for consumers relating to contract disclosure and the ability to cancel a credit agreement entered into over the telephone, and the complete removal of the exemption would result in the need for credit telemarketers to comply with two sets of regulation regarding pre-contract disclosure and cooling-off. (b) Charitable Fundraising Appeals New South Wales Clause 88B (1) (c) of the NSW Regulation excludes contracts for the supply of goods and services arising out of the conduct of a fundraising appeal within the meaning of the Charitable Fundraising Act 1991 (NSW) from the operation of the direct commerce law. Under the NSW Charitable Fundraising Act and Charitable Fundraising Regulation 2003, clause 13 [Fundraising through telemarketing] of Schedule 1 (Conditions applying to certain authorities) provides that if a fundraising appeal is conducted by soliciting through means of a telephone (whether it involves merely seeking a donation or the selling of a product), the authorised fundraiser conducting the appeal must ensure that it is conducted in accordance with Part C of the ADMA Code of
13
Practice published by the Australian Direct Marketing Association Limited, dated November 2001. Part C addresses, among other things, constraints on hours of calling and frequency of calling but not a cooling off right. Victoria There is no exemption in Victoria for telephone marketing agreements arising out of the conduct of a fundraising appeal. Comment The requirements imposed on charitable organisations are inconsistent. The restrictions on hours of calling are different and there is no cooling off period in New South Wales. Options for action Do nothing.
Charitable organisations in each state will continue to operate in compliance with state-based legislation. New South Wales amends the NSW Regulation to remove the exemption.
This will result in charitable organisations in New South Wales being required to comply with two sets of rules relating to the conduct of telemarketing. New South Wales amends the NSW Regulation to remove the full exemption and provide for a partial exemption relating to hours of calling and frequency of calling (as provided for through the Charitable Fundraising legislation). The cooling-off provisions would be reinstated.
This would enhance consistency by requiring charitable organisations in New South Wales and Victoria to provide a cooling-off period for contracts for the supply of goods or services over $100. Victoria amends the Victorian Regulation to provide that telephone marketing agreements arising out of the conduct of a fundraising appeal do not have to comply with the cooling-off period.
This would enhance consistency with NSW on the cooling-off issue but would result in Victorian consumers losing their protection in relation to a cooling-off period. The regulation of charitable telemarketing on the same basis as other telemarketing can be justified on the basis that consumers need as much protection from high-pressure selling when dealing with charitable telemarketers as with others, and perhaps more, considering the emotional pressure that can be exerted. Further, there would not be harmonisation on hours of calling. (c) Classified Advertising
14
New South Wales Clause 88D of the NSW Regulation provides for a partial exemption for classified advertising: cl.88D(a) exempts classified advertising from section 40D(3)(b) of the Act, unless the contract is for the supply of a series of advertisements over a period of time; and cl.88D(b) exempts classified advertising from section 40E of the Act once the publication deadline has passed; and cl.88D(c) exempts classified advertising from section 40H of the Act. This means telemarketers of classified advertising do not have to comply with the cooling-off period once the publication deadline has passed; do not have to provide written information about cooling-off rights to consumers unless the contract is for the supply of a series of advertisements over a period of time; and are permitted to collect fees during the cooling-off period for services provided during this period. Telemarketers of classified advertising do have to comply with the restricted calling hours and 30 day „no call back‟ rule. Victoria Sub-regulations 8(4) and (6) of the Victorian Regulation provide for a partial exemption for classified advertising. A telemarketer who telephones a consumer with the aim of negotiating a contract for the supply of classified advertising: does not have to provide written cancellation information or the terms of the contract, or comply with the cooling-off provisions, provided that under the contract, the consumer can cancel an advertisement (by telephone) before the publication deadline; and is permitted to collect fees during the cooling off period for services provided during this period. Telemarketers of classified advertising do have to comply with the restricted calling hours and 30 day „no call back‟ rule. Comment The NSW and Victorian provisions dealing with the cooling-off period are drafted in different terms. The policy intent of clause 88D(a) of the NSW Regulation is to ensure that if a consumer has been sold a package of advertisements that will appear, say, every Saturday for six weeks, the consumer can exercise the right to cancel that package, or part of it, during the statutory cooling-off period. In order to exercise the right, the consumer must be told they have the right and how to exercise it. Under the Victorian provisions, the statutory cooling-off right applies, to agreements both for a single advertisement or for a series of advertisements, only if there is no contractual right to cancel the advertisement before the publication deadline or, in the case of a series of advertisements, no contractual right to cancel all advertisements before the publication deadline for the first one or the remaining ones before the publication deadline for the next one.
15
Options for action Do nothing Interstate telemarketers of classified advertising to consumers in Victoria would not have to comply with the Victorian provisions as long as they provide the required contractual right to cancel advertisements. If they are selling a series of advertisements to consumers in New South Wales they would have to confirm the agreement made over the phone in writing and include a statement about the cooling-off rights. It would be usual business practice for the agreement made in Victoria to be confirmed in writing and include a statement about the contractual cancellation rights. However, if the required contractual right is not provided to Victorian consumers and the interstate telemarketer is selling a series of advertisements, it must comply with the differing NSW and Victorian provisions. New South Wales amends the NSW Regulation to align with the Victorian Regulation. This would mean that the regime would revolve around the existence or otherwise of a contractual right to cancel. Victoria amends the Victorian Regulation to align with the NSW Regulation. This would mean repealing a recent amendment made in the Fair Trading (Further Amendment) Regulations 2004 and negating the arrangements that Victorian newspapers have made to provide contractual cancellation rights to classified advertisers.
16
Attachment One
New South Wales – Summary of Direct Commerce Provisions
Direct commerce is the term used to describe what are generally known as „door-todoor sales‟ and „telemarketing‟. Traders engage in direct commerce if: they go from place to place, or make telephone calls, seeking out consumers who may be prepared to enter into direct commerce contracts; and they enter into negotiations with the consumer with a view to making a direct commerce contract. Under the law, traders who engage in direct commerce are known as „dealers‟. A dealer may also be the supplier of the goods and services, or may be negotiating direct commerce contracts on behalf of the supplier. A direct commerce contract has all the following features: it is for the supply of goods or services to an individual the total consideration (cash or credit) payable under the contract is not ascertainable at the time the contract is made or is ascertainable at the time and is more than $100. the contract negotiations take place between the dealer and consumer at a place other than the business or trade premises of the supplier, or over the telephone the dealer has visited or called the consumer in the course of direct commerce the consumer did not invite the dealer to visit or call them for the purpose of entering negotiations. The law does not apply to the following types of contracts: business contracts customer supply contracts for gas and electricity contracts arising out of the conduct of a fundraising appeal contracts for the supply of a financial product or managed investment scheme within the meaning of the Corporations Act 2001 – including securities (shares and debentures), managed investments (eg units in trusts), superannuation, life and general insurance, derivatives and deposit products. (Note: Credit contracts are not financial products within the meaning of the Corporations Act.) The law does not apply in the following situations: a dealer visiting or telephoning to negotiate a contract for the supply of goods or services that are the same kind as those supplied under an existing contract between the supplier and a consumer.
Example: The consumer is a member of a wine club and the dealer calls with a new wine offer.
The consumer has purchased a mobile phone from a telecommunications company and the supplier calls to offer an upgraded mobile phone.
a contract exists between a consumer and a supplier and the supplier visits or telephones the consumer for the purpose of maintaining the goods or services
17
provided under the contract or making a minor change to the terms of the contract.
Example: A telecommunications company detects a fault in a landline phone service and telephones their customer to offer a fault rectification service.
Cooling-off period The law provides for a cooling-off period during which a consumer may cancel a direct commerce contract. Consumers cannot waive this right or any right conferred under the new laws. Consumers must be given written information about their cancellation rights and how to exercise them. There are no prescribed forms – dealers/suppliers can decide how to provide this information. Consumers can exercise their cancellation rights by giving written notice to the dealer or supplier during the cooling off period. They can give notice in person, by mail, by fax or by email. Where the cancellation notice is sent by post, it is deemed to have been given to the supplier at the time of posting. In the case of a contract made in the presence of both dealer and consumer (doorto-door sales): the written information about cancellation rights must be given to the consumer before the contract is made the consumer may give notice of cancellation within five clear business days from the day the contract was made In the case of a contract made over the telephone (telemarketing): the information about cancellation rights must be given to the consumer over the phone before the contract is made the information must subsequently be given to the consumer in writing the consumer may give notice of cancellation during the period beginning when the contract was made, and ending five clear business days from the day the written cancellation information was given to the consumer. Any direct commerce contract can provide for a longer cooling-off period. Fees for services A dealer or supplier must not collect fees during the cooling off period for services wholly provided by the dealer or supplier during that period or capable of being wholly provided.
Example: An itinerant roof repairer who calls uninvited and charges more than $100 for a job cannot collect the fee if the repair work is carried out during the cooling off period.
A dealer or supplier is permitted to collect fees during the cooling off period for services that are supplied on a continuing basis.
Example: A dealer selling loyalty club memberships worth more than $100 can collect fees during the cooling off period because services supplied through the consumer‟s use of a membership card or discount voucher are supplied from time to time on a continuing basis.
18
Restricted hours A dealer must not visit or telephone a consumer for the purpose of negotiating a direct commerce contract between the hours of 8 pm and 9 am seven days a week, unless the dealer has made a prior appointment. Dealer to cease contact A telemarketer must immediately cease negotiations when requested to do so, and the telemarketer or, if the telemarketer was acting on behalf of a supplier, the supplier or any other person on behalf of the supplier may not contact the consumer again by telephone for at least 30 days. A dealer who calls at any premises for the purpose of negotiating a direct commerce contract must leave the premises as soon as it is practicable when requested to do so by a consumer. Dealer to disclose identity A dealer who calls on a consumer for the purpose of negotiating a direct commerce contract must advise the consumer of the purpose of the visit and produce an identity document setting out the dealer‟s full name and the supplier‟s address, and if the dealer is not the supplier, the supplier‟s full name. Exceptions
Consumer credit
A dealer or supplier who engages in direct commerce with the aim of negotiating a consumer credit contract does not have to comply with the cooling-off provisions if the contract is covered by the Uniform Consumer Credit Code. However, they must comply with the rules about restricted hours, ceasing contact and (where relevant) disclosure of identity.
Classified advertising
A dealer or supplier who engages in direct commerce with the aim of negotiating a contract for the supply of classified advertising: does not have to comply with the cooling-off provisions once the publication deadline for the advertisement has passed; does not have to provide written cancellation information unless the contract is for the supply of a series of advertisements over a period of time; and is permitted to collect fees during the cooling off period for services provided during this period. The dealer or supplier must also comply with the rules about restricted hours, ceasing contact and (where relevant) disclosure of identity. After cancellation any goods received by the consumer must be returned to the supplier or the supplier notified where the goods can be collected any money paid by the consumer must be refunded once the supplier receives the goods or the notice If the supplier does not collect the goods within 28 days after cancellation they become the consumer‟s property a consumer who does not take reasonable care of the goods before returning them is liable to compensate the supplier for any damage
19
a consumer who is supplied services on a continuing basis must be refunded any money paid for services that are not used. a trader must not take or threaten any legal action against the consumer to enforce the contract, or place or threaten to place the consumer‟s name on a default listing A trader can take legal action to challenge the validity of the cancellation of a contract.
Non-compliance A trader who does not give the consumer written information about their cancellation rights and how to exercise them cannot enforce the direct commerce contract against the consumer. A trader in breach of the requirements of the law faces a maximum penalty of $11,000.
20
Attachment Two
Victoria – Summary of Telephone Marketing Agreement Provisions
A telephone marketing agreement has all the following features: it is for the supply of goods or services to an individual; the total consideration (cash or credit) payable under the contract is not ascertainable at the time the contract is made or is ascertainable at the time and is more than $100; the contract negotiations take place between the supplier or agent (called here, "telemarketer") and consumer over the telephone; the consumer did not invite the telemarketer to call for the purpose of entering negotiations. The law does not apply to the following types of contracts: customer supply contracts for gas and electricity (exemptions contained in energy industry legislation); contracts for the initial connection of water, sewerage and landline-telephone services contracts solely for the provision of credit; contracts of guarantee; mortgages; contracts for the supply of a financial product or managed investment scheme within the meaning of the Corporations Act 2001 – including securities (shares and debentures), managed investments (eg units in trusts), superannuation, life and general insurance, derivatives and deposit products. (Note: Credit contracts are not financial products within the meaning of the Corporations Act.) The law does not apply in the following situations: a telemarketer telephoning to negotiate a contract for the supply of goods or services that are the same kind as those supplied under an existing contract between the supplier and a consumer.
Example: The consumer is a member of a wine club and the telemarketer calls with a new wine offer. The consumer has purchased a mobile phone from a telecommunications company and the telemarketer calls to offer an upgraded mobile phone.
a contract exists between a consumer and a supplier and the telemarketer telephones the consumer for the purpose of maintaining the goods or services provided under the contract or making a minor change to the terms of the contract.
Example: A telecommunications company detects a fault in a landline phone service and telephones their customer to offer a fault rectification service.
Explicit informed consent For the telephone marketing agreement to be valid, the telemarketer must have clearly, fully and adequately disclosed all relevant matters to the consumer, the consumer must have given consent to the sale directly to the telemarketer in writing or orally, and if orally, the telemarketer must have made a record of the consent.
21
Cooling-off period The law provides for a cooling-off period during which a consumer may cancel a telephone marketing agreement. Consumers cannot waive this right or any right conferred under the new laws. Consumers must be given written information about their cancellation rights and how to exercise them, in the prescribed form. Consumers can exercise their cancellation rights by telephoning the telemarketer or by giving written notice to the supplier during the cooling off period. They can give notice in person, by mail, or by fax. Where the cancellation notice is sent by post, it is deemed to have been effected by properly addressing, prepaying and posting the document as a letter to the supplier (Interpretation of Legislation Act). The further obligations of the telemarketer are: the information about cancellation rights must be given to the consumer over the phone before the contract is made; the information must also be given to the consumer in writing within 5 days of the telephone conversation (or any longer, agreed period); the consumer must be given the terms of the agreement in writing within 5 days of the telephone conversation (or any longer, agreed period); the consumer may give notice of cancellation within 10 days from and including the day the consumer receives the above documentation. Any telephone marketing agreement can provide for a longer cooling-off period. Fees for services A telemarketer must not collect fees during the cooling off period for services wholly provided by the dealer or supplier during that period or capable of being wholly provided.
Example: An itinerant roof repairer who calls uninvited and charges more than $100 for a job cannot collect the fee if the repair work is carried out during the cooling off period.
A dealer or supplier is permitted to collect fees during the cooling off period for services that are supplied on a continuing basis.
Example: A dealer selling loyalty club memberships worth more than $100 can collect fees during the cooling off period because services supplied through the consumer‟s use of a membership card or discount voucher are supplied from time to time on a continuing basis.
Restricted hours A telemarketer must not telephone a consumer for the purpose of negotiating a telephone marketing agreements between the hours of 8 pm and 9 am on weekdays, between 5pm and 9am weekends and not at all on public holidays. Dealer to cease contact A telemarketer must immediately cease negotiations when requested to do so, and may not contact the consumer again by telephone for at least 30 days for the purpose of negotiating a telephone marketing agreement.
22
Partial exemptions
Classified advertising
A telemarketer who telephones a consumer with the aim of negotiating a contract for the supply of classified advertising: does not have to provide written cancellation information or the terms of the contract, or comply with the cooling-off provisions, provided that under the contract, the consumer can cancel an advertisement (by telephone) before the publication deadline; and is permitted to collect fees during the cooling-off period for services provided during this period. The telemarketer must also comply with the rules about restricted hours and ceasing contact. After cancellation any goods received by the consumer must immediately be returned to the supplier or the supplier notified where the goods can be collected; any money paid by the consumer must immediately be refunded; if the supplier does not collect the goods within 30 days after cancellation they become the consumer‟s property; a consumer who does not take reasonable care of the goods before returning them is liable to compensate the supplier for any damage; a consumer who is supplied services on a continuing basis must be refunded any money paid for services that are not used. Non-compliance A telephone marketing agreement that is obtained without the explicit informed consent of the consumer is void. A telemarketer who does not give the consumer written information about their cancellation rights and how to exercise them, or the written terms of the agreement, cannot enforce the agreement against the consumer. A trader in breach of the requirements of the law faces a maximum penalty of $24,540.
23