Enhancements to Unfair Contract Term Protections

Closed 27 Mar 2020

Opened 13 Dec 2019

Overview

On 1 July 2010, protections for consumers against unfair contract terms (UCTs) in standard form contracts were introduced into the Trade Practices Act 1974 (now contained in the Australian Consumer Law, which is Schedule 2 to the Competition and Consumer Act 2010) and the Australian Securities and Investments Commission Act 2001.

In November 2016, the UCT protections were extended to small business contracts. Two years later, the Government undertook a review of these new protections for small business contracts (2018 Review).

Consultation update

Evidence gathered through the public consultation shows that unfair contract terms remain prevalent in standard form contracts and there is uncertainty around the scope of the existing protections.

On 6 November 2020, Commonwealth and state and territory consumer affairs ministers agreed to strengthen the existing unfair contract term protections in the Australian Consumer Law. Key reforms include:

  • making unfair contract terms unlawful and giving courts the power to impose a civil penalty
  • increasing eligibility for the protections by expanding the definition of small business and removing the requirement for a contract to be below a certain threshold
  • improving clarity on when the protections apply, including on what is a ‘standard form contract’.

These reforms will help reduce the prevalence of unfair contract terms in standard form contracts, and improve consumer and small business confidence when entering into contracts.

Further detail is outlined in the Legislative and Governance Forum on Consumer Affairs (CAF) meeting communique and in the Decision Regulation Impact Statement.

As a next step, Treasury will develop exposure draft legislation, which will provide a further opportunity for stakeholders to comment on the detail of the reforms.

Background

The consultation sought stakeholder feedback on a range of policy options to address the issues identified by the 2018 Review. It also sought views on whether any enhanced UCT protections for small business contracts should also be extended to consumer and insurance contracts to ensure consistency in the operation of the protections.

Submissions were sought from a wide range of interested parties from small, medium and large businesses through to individual consumers. Treasury also held consultation roundtables in March 2020 with a broad range of stakeholders in Sydney, Melbourne, and via videoconference.

View submitted responses.

Enquiries

Email: uctprotections@treasury.gov.au

Audiences

  • Businesses
  • Businesses - large
  • Businesses - medium
  • Businesses - small /micro
  • Consumer groups
  • Finance/Banking sector
  • Individuals
  • Industry
  • Industry bodies
  • Industry association
  • Insurers
  • Law professionals
  • Peak body
  • Representative body
  • Sectoral peak bodies

Interests

  • Business
  • All interests
  • Insurance
  • Agriculture
  • Building and construction
  • Legislation and regulations
  • Policy development
  • Competition and Consumer Act
  • Consumer Law
  • Consumer Policy
  • Consumer Protection