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The AUSTRALIAN CONSUMER LAWAUSTRALIAN CONSUMER LAWAUSTRALIAN CONSUMER LAWAUSTRALIAN CONSUMER LAW

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Australian Consumer Law

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PurposePurposePurposePurpose

This training is designed to:

• Explain the Australian Consumer Laws (“ACL”) that form part of the new Competition and Consumer Act 2010

• Detail what you can and can’t say when explaining warranties• Explain what the extended warranty sales process is to be post December

2011.• Explain what you must must must must do to comply with the ACL post December 2011


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OutcomesOutcomesOutcomesOutcomes

At the end of this training, you will:

• Understand the statutory consumer guarantees• Understand consumers rights and remedies under the Australian Consumer

Law (“ACL”)• Understand what constitutes false or misleading representations• Know what penalties apply to breaches of the ACL• Participate in a case study discussion• Be required to successfully complete an assessment


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Overview of the ACL

The Trade Practices Act 1974 (TPA) was replaced by the Competition & Consumer Act 2010 (CCA) on 1 January 2011The consumer protection provisions that were in the TPA are now contained in the ACL and are in Schedule 2 of the CCA, which

• introduces a single national consumer law• replaces the TPA implied warranties and conditions with statutory consumer statutory consumer statutory consumer statutory consumer

guaranteesguaranteesguaranteesguarantees• contains a new provision in relation to false and misleading representationfalse and misleading representationfalse and misleading representationfalse and misleading representation• prescribes requirements relating to the form of warranties against defectswarranties against defectswarranties against defectswarranties against defects

• introduces a national unfair contracts regimenational unfair contracts regimenational unfair contracts regimenational unfair contracts regime;

• creates a nationalnationalnationalnational legislative scheme for consumer product safetyproduct safetyproduct safetyproduct safety; and

• enhances the powers of the ACCC enhances the powers of the ACCC enhances the powers of the ACCC enhances the powers of the ACCC to deal with contraventions of consumer law,

including substantiation notices and infringement notices

Australian ConsumerConsumerConsumerConsumer Law

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What goods & services are covered

• The statutory consumer guarantees under the ACL apply to:• Consumer goods or services less than

$40,000 purchased on or after January 1st

2011

• Includes second hand goods

• Goods and services over $40,000 which are of a kind ordinarily obtained for domestic, household or personal use or consumption

• Vehicles and trailers acquired for use principally in the transport of goods on public roads regardless of value

• The guarantees do not apply to insurance and financial services


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The consumer guarantees

The following are the 9 statutory consumer guarantees relating to the supply of goods and services that apply under the ACL:

• Goods will be of an acceptable quality

• Goods will be fit for a specified purpose

• Goods will correspond with their description

• Goods will match any sample or demonstration model

• Suppliers and manufacturers will comply with extra promises made about goods -express warranties

• Suppliers guarantee they have the right to sell the goods (clear title)

• Goods are free from undisclosed securities, charges or encumbrances

• The consumer has the right to undisturbed possession of goods

• The manufacturer of goods will ensure that repairs and spare parts are reasonably available

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The statutory consumer guarantees relevant to motor vehicle sales are:

• goods are of 'acceptable quality’

• goods are fit for any purpose that the consumer makes known to the supplier

• goods sold by demonstration model or by description will correspond with the demonstration model or description

• the manufacturer and supplier will comply with any express warranty given or made by them

• repairs and spare parts are reasonably available

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The key concept of the consumer guarantees is that goods sold be of 'acceptable quality‘, which means that a consumer may be entitled to a remedy for a failure of a good which occurs after the dealer statutory warranty expires, regardless of an extended warranty, if it can be shown that based on certain factors the failure should not have occurred



• What does ‘acceptable quality’ mean?

• Goods will be of acceptable quality if they are:• fit for all of the purposes for which goods of that kind are commonly supplied;

• acceptable in appearance and finish;

• free from defects; and

• safe and durable

• Criteria applied according to what a reasonable consumer would regard as acceptable. Consideration must be given to:

• the nature and price of the goods;

• representations about the goods made by the supplier or manufacturer;

• statements made about the goods on packaging or labels;

• any other relevant circumstances; and

• in the case of second hand goods – age, price and condition

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• What does ‘fit for a specified purpose’ mean?

• A supplier guarantees that goods will be reasonably fit for any purpose that they told the consumer they would be fit for• For example - A diver buys a watch that the supplier says will be suitable for diving.

A few weeks later after the first dive, the dial is filled with water.

• A consumer either expressly or implicitly told the supplier that they want the goods to be fit for a specific purpose• For example – A consumer tells a lawn mower supplier they want a mower that will

be capable of mowing 4 hectares a week, but is sold a middle of the range mower which is only expected to mow a suburban house block. The goods would not be fit for purpose

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• ‘Warranties against Defects’ are more generally known as manufacturers warranty, and deals with what the manufacturer will do when something goes wrong with the goods

• ‘Express warranties’ focus on a promise of what the goods will look like or are capable of doing• For example

• a supplier tells the consumer that a bed will last for 10 years. If the bed only lasts for 6 years, then the consumer is entitled to a remedy

• A consumer buys a deck chair, the written warranty states that the chair can hold up to 100 kilograms – this is an ‘express warranty’

• If the chair breaks after a person weighing 50 kilograms sits on it, then the consumer can insist that the express warranty contained in the warranty be honoured

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Form of Warranties against Defects

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Form of Warranties against Defects

• From January 1st 2012 a warranty against defects must be in writing and:• Be expressed in a transparent way – in plain language, legible and presented clearly

• Contain the warrantor’s name, business address, phone number and email address

• Set out relevant claims periods or procedures, and

• Include a statement that rights under the warranty sit along side the consumer guarantees, which can not be excluded – “Prescribed wording”

• Potential penalties of $50,000 for corporations and $10,000 for individuals

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False or Misleading representation

• The CCA sets out penalties if a business tells a consumer that a guarantee does not exist, may be excluded or may have a particular effect including a business representing that it will not be responsible for reasonably foreseen consequences

• Maximum penalties of $1.1 million for corporations and $220,000 for individuals may apply for committing this offence

• The ACL states that a term of a contract that purports to exclude, restrict or modify the operation of the consumer guarantees is void

• A supplier must also not represent to a consumer that they are required to pay for a right or remedy under an extended warranty, to which they are entitled to under the ACL

• Strict liability offences apply

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Avoiding a breach

• Statutory consumer guarantees provide rights that exist despite anything the supplier or manufacturer may say or do. These rights may extend beyond the dealer statutory warranty expiry. To suggest otherwise may amount to false or misleading conduct

• To minimise risk, suppliers and manufacturers should:

• not pressure consumers to buy an extended warranty; or

• not tell consumers that they must pay for an extended warranty when the warranty only provides rights that are equivalent to a statutory consumer guarantee

• explain to consumers what an extended warranty would provide over and above the consumer’s rights under the statutory consumer guarantees

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Remedies available to Consumers

• A consumer has the right of remedy if goods and services do not meet a consumer guarantee

• The consumer guarantees apply to both major (serious) and minor problems

• The type of remedy, and who must provide it, will depend on the problem and which consumer guarantee was not met

• Gift recipients have the same rights as a consumer who has bought the goods direct

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Remedies available to Consumers

• Depending on the circumstances and whether or not the failure under the consumer guarantee is major or minor, the consumer may be entitled to either:

• Repair

• Replacement,

• Refund, and/or

• Compensation

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Australian ConsumerConsumerConsumerConsumer LawLawLawLaw

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Major failures in relation to Goods

A ‘major failure’ occurs if:• the goods would not have been acquired by a reasonable consumer fully acquainted with

the nature and extent of the failure

• there is significant departure from supply description, or sample or demonstration model,

• the goods are substantially unfit for intended purpose or purpose made known to supplier, or

• the goods are unsafe.

In theses circumstances, the consumer may elect to:• Reject the goods and get a refund

• Reject the goods and get an identical replacement, one of similar value

• Keep the goods and get compensation for the loss of value caused

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Minor failures in relation to Goods

A ‘minor failure’ is any other failure that is not considered to be a major failure

When the failure is minor, the supplier can choose between: • providing a repair,

• offering the consumer a replacement, or

• a refund

If the supplier refuses or take more than a reasonable time to repair the goods, the consumer can:

• Take the goods elsewhere to be repaired and ask the supplier to pay the reasonable costs

• Reject the goods and ask for a refund, or

• Reject the goods and ask for a replacement if one is reasonable available to the supplier

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Compensation for Consequential loss

• A consumer can claim compensation for consequential loss from a supplier who failed to meet one or more of the consumer guarantees

• Consequential loss is the cost to a consumer indirectly resulting from the failure and include, among other things, lost profits and expenses

• Compensation should put the consumer in the position they would have been in if the goods or services had met the consumer guarantees

• A supplier will have to pay for losses that:

• Could have been expected to result from a failure to meet a consumer guarantee, and

• Are reasonably foreseeable

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Who is responsible for remedy?

Who can the consumer claim a remedy from?

• The supplier, if the goods do not meet the consumer guarantees as to

• Fitness for any disclosed purpose

• Matching sample or demonstration model

• Title, undisturbed possession or undisclosed securities

•Both the supplier and manufacturer, if the goods do not meet the consumer guarantees as to

• Acceptable quality

• Express warranties, and

• Matching description

•The manufacturer, if goods do not meet the consumer guarantees as to repairs and parts

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CASE STUDY

Case StudyDavid, our typical average consumer, needs a new car and wants something that is economical to run, and decides to look at a Toyota Yaris.

During negotiations with the salesperson, the salesperson tells David he should also consider taking out an extended warranty, as this will protect him from any financial costs due to breakdown after the 3 years manufacturers warranty expires, as he will have to cover any repair costs himself.

Has the salesperson breached any section of the ACL?

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AustralianAustralianAustralianAustralian Consumer Law

Case StudyIn the previous example, the sales person is likely to be guilty of misleading and deceptive conduct as they have indicated that without an extended warranty David will have no rights to have a fault repaired, which is an offence under the ACL.

The ACL sets out penalties if a business tells a consumer that a guarantee does not exist, may be excluded or may have a particular effect including a business representing that it will not be responsible for consequential loss:

• Maximum civil penalty of $1.1m for body corporate and $220,000 for individuals

• Criminal penalties of the same amounts also apply

Strict Liability offences apply 23


Case StudyWhat the salesperson should have said was that David may also like to talk to the Business Manager about extending his 3 years warranty.

He should then make advise David that if he does choose to extend his warranty, then David’s rights under the ACL will not be affected in any way.

NOTE: Post January 2012 anyone who is not accredited to sell insurance products will not be able to discuss extended warranty with customers.

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Case StudyDavid is interested in buying the Yaris as it appears to meet all his requirements. He tells the salesperson he has a boat that weighs 2 tonne that he needs to tow from time to time.

The salesperson tells David that the Yaris would not be capable of towing such a large boat.

David decides to buy the Yaris anyway. Some months later, David returns to the dealership complaining that the Yaris didn’t meet all his requirements as he is unable to tow his boat to a new jetty, and wants the dealer to take the car back and refund his money.

Has the dealer any responsibility to remedy in this instance under any consumer guarantee?

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Case StudyNo. During the buying process David disclosed to the salesperson that he needed a car that would tow his boat.

The salesperson advised that the Yaris was not suitable to the purpose David disclosed to him.

Had the salesperson not advised David of the limitation, the dealer would have failed under the statutory consumer guarantee of “fit for a disclosed purpose”.

In this case, (a major failure) David would have been entitled to choose one of following remedies:

• Reject the goods and seek a replacement of the vehicle, or

• Reject the goods and seek a full refund, and

• Recover damages for any loss or damage that was reasonably foreseeable

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Case StudyDavid kept the car for 4 years before trading the vehicle in on a Toyota Kluger.

The dealer resold the Yaris as a pre-owned vehicle to Karen. 8 months later, Karen has the vehicle towed back to the dealership after it broke down.

After inspection, it is found that the gearbox in the Yaris had failed, and advise Karen that as the vehicle was now out of warranty, it would cost her $2,700 for a new gearbox to be fitted.

Karen can’t believe that a car that is less than 5 years old could have such a problem and wants the dealer to repair the vehicle at their expense.

As the owner of a used vehicle – has Karen any right to remedy under the statutory consumer guarantees?

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Case StudyYes – the statutory consumer guarantees cover:

• Consumer goods or services less than $40,000

• Includes second hand goods, and

• Vehicles and trailers are also covered under the ACL regardless of value

The gearbox failure does not meet the definition of a major failure. If the failure of the gearbox was determined as a failure under the consumer guarantees, the dealer( the supplier) can choose to either:

• provide a repair,

• offer the consumer a replacement, or

• a refund

The consumer is also potentially entitled to costs for consequential loss such as towing and car hire

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Toyota Extracare and Warranty Insurance

ACL Compliance Bridging Module

Outcomes

At the end of this training, you will:

• Understand the changes to the TEC products• Understand the changes to the TI Extended Warranty products• Be able to describe the correct sales process to offer extended warranty• Be required to complete an assessment


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Overview

• Background – why the need to change• The new product range• Sales Process - Disclosures at POS• Case Study • What next?

ACL Compliant Product Changes

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Why the change?

• The ACL does not prohibit the sale of extended warranties, however it is important that all extended warranty products are compliant with the regulations under the ACL

• On January 1st 2012, regulation 90 of the ACL comes into effect which prohibits the issuing of any documents that do not comply with regulation 90

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New Product Range - TEC

• The TEC products will all be retained but will only be available for TMCA Campaigns or Dealer oncost programs• Extended Factory Warranty• Dealer Warranty Protection• Dealer Warranty Protection Plus

• Vehicle Hire removed from Additional Benefits

• Products will not be eligible for T1 Rewards

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““““Must be seen to be free of chargeMust be seen to be free of chargeMust be seen to be free of chargeMust be seen to be free of charge””””

New Product Range - TI

• The Toyota Insurance products will all be retained

• All eligibility criteria has been upgraded to mirror the TEC equivalent

• New Additional Benefits have been added

• New Warranty Insurance product added to range• Warranty Insurance Basic – drivetrain

warranty

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New Product Range - TI

• Additional Benefits

• Car hire when vehicle off road for more than 8 hours – max 14 days ($80 per day)

• Accommodation up to $500

• Reasonable cost of Towing

• Consumable Items

• Quality Repair Guarantee

• MVI Vehicle Basic Excess cover to a max $600 during the term of cover only – Toyota Insurance only

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TEC Product OptionsEXTENDED FACTORY

WARRANTY � Contract (warranty services)

between TMCA and the Customer

� Extension of the Toyota new vehicle warranty

� Repair/replace defective components under normal operating conditions

� Administered by TFS� Toyota vehicles ONLY� Toyota Genuine Parts

guarantee

ELIGIBILTY• TMCA Campaign• Dealer oncost program

TERMS AVAILABLE� 12,24 or 36 months� 100,000kms or 150,000kms

ADDITIONAL BENEFITS� Towing

DEALER WARRANTY PROTECTION

� Contract between Selling Dealer and the Customer

� Drivetrain warranty only covers only listed components (refer PDS)

� Administered by TFS� Toyota/non Toyota vehicles

ELIGIBILTY� Available at POS Dealer

oncost only� vehicles up to 10 yrs

150,000km

TERMS AVAILABLE� 12,24 or 36 months� 200,000kms or

NOTE� Claims Limits Apply

NOTE: This summary is intended as a guide ONLY – you should refer to the PDS for full details

DEALER WARRANTY PROTECTION PLUSl

� Contract between Selling Dealer and the Customer

� Covers most major components from original manufacturers warranty with minor exceptions


ELIGIBILTY� Available at POS Dealer

oncost only� vehicles up to 8 yrs

120,000kms

TERMS AVAILABLE� 12,24 or 36 months� 100,000kms / 150,000kms

ADDITIONAL BENEFITS� Towing

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TI Extended Warranty OptionsFACTORY APPROVED EXTENDED

WARRANY INS

� Contract of Insurance between ANDIA and the Customer

� Extension of the Toyota new vehicle warranty


� Administered by TFS

� Toyota vehicles ONLY

� Toyota Genuine Parts guarantee

ELIGIBILTY

� Vehicles up to 8 years or 120,000 kms

� Available at POS or up to expiry of new vehicle warranty / 90,000km

TERMS AVAILABLE

� 12,24 or 36 months

� 100,000kms or 150,000kms

EXTENDED WARRANY INSURANCE


� Extension of the manufacturers new vehicle warranty


� Administered by TFS� Non Toyota vehicles

ELIGIBILTY� Vehicles up to 8 years or 120,000

kms� Available at POS or up to expiry of

new vehicle warranty / 90,000kms

TERMS AVAILABLE

� 12,24 or 36 months� 100,000kms or 150,000kms

EXTENDED WARRANTY INSURANCE - BASIC


� Drivetrain warranty only covers only listed components (refer PDS)


CLAIM LIMITS APPLY• <150,000 kms - CMV• >150,000kms – max $2,500

…………………….

ELIGIBILTY� Available at POS only on vehicles up

to 10 yrs 150,000km� ………………………………………….

TERMS AVAILABLE� 12,24 or 36 months� 200,000kms or 150,000km

NOTE: This summary is intended as a guide ONLY – you should refer to the PDS for full details

ADDITIONAL BENEFITS

� Accommodation – max $500

� Vehicle hire for up to 14 days were vehicle is off road for more than 8 hours

� MVI Basic Excess Cover to a max $600 during the term of cover – Toyota Insurance Only

ADDITIONAL BENEFITS

� Reasonable cost Towing

� Quality Repair Guarantee

� Consumable Items

Sales Process

• Offer the warranty product as normal (factual information)• Explain the coverage of the policy for parts and labour, and point out any exclusions

by referring to the appropriate page of the PDS • Do not tell the customer that without and extended warranty product they will have

no remedy for any faults which occur after the vehicle warranty expires

• Once the customer has confirmed their interest, you must advise the customer • “Nothing within the Toyota Insurance Extended Warranty products affects any

statutory rights you may have under the Australian Consumer Laws”• Provide with them with a PDS

• Do this verbally, and by referring to the wording within the document

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Case Study - Consider this

Rob has purchased a second hand Kluger, and is now with Sue, the dealers Business Manager, finalising the paperwork.

They discuss extended warranty insurance, and Sue advises Rob that it is a good idea to take an extended warranty insurance as the vehicle only comes with 3 months dealer statutory warranty.

Has the Sue breached any section of the ACL?

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Case StudyIn the previous example, Sue is likely to be guilty of misleading and deceptive conduct as she has indicated that without and extended warranty insurance Rob will have no rights to have a fault repaired, which is an offence under section 151.

The CCA sets the following penalties if a business tells a consumer that a guarantee does not exist, may be excluded or may have a particular effect including a business representing that it will not be responsible for consequential loss:

•Maximum civil penalty of $1.1m for body corporate and $220,000 for individuals

•Criminal penalties of the same amounts also apply

Strict Liability offences apply

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Case StudySue should have explained the cover provided under the extended warranty insurance available to Rob.

Sue should also then verbally advise Rob that nothing in the policy reduces or diminishes any statutory rights he may have under the ACL, pointing out the prescribed wording in the PDS.

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What do I need to do now?

• Complete the ACL training by 31st December 2011

• Complete the Product Bridging module

• Ensure all current PDS stock is removed and destroyed by 31st December 2011

• Continue to offer TI extended warranty products as usual, promote the additional features, and ensure that you advise each customer that the warranty does not affect any statutory right they have under theCompetition and Consumer Act 2010.

• Post January 1st only accredited individuals will be able to discuss and promote extended warranty

• Extended Warranty Insurance PDS may initially only available in soft copy from the BOS system

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