Consumer protections – auction warranties; debt management firms; and gift cards and insolvencies

The Ministers for Consumer Affairs of Australia and New Zealand recently met, on 26 October 2018 in Melbourne, making a range of significant decisions 

about consumer protection issues.

Three matters in particular were, auction warranties, debt management advisers and gift cards.

  1. Exemption from consumer protection laws for goods sold by auction 

The Ministers agreed to maintain the current exemption in the Australian Consumer Law from consumer guarantees for goods sold via auctions: see s 54-59 ACL. In its review of the ACL, Treasury had canvassed removal of this exemption, thereby giving auction purchasers their full consumer rights.  This is the legal position in New Zealand, under the Consumer Guarantees Act.

The Ministers noted that New Zealand will be undertaking a review of its more recent consumer law reforms including changes made to the consumer protections applying to auctions.

The Ministers decided that there would be benefits in further considering the question whether auction sales should remain outside the ACL in light of the outcomes of the New Zealand review.

The Auctioneers and Valuers Association of Australia (AVAA) had opposed the giving of warranties at auctions, saying it was

“pleased to advise that the Consumer Affairs Forum decided the Australian Consumer Law would remain [retain?] the Status Quo, voting not to remove the exemptions for auction in relation to certain consumer guarantees.”

Compare the ARITA website.

CHOICE took the view that the warranty should apply:

“In a situation where a seller stands to profit from selling goods, there should be an obligation on that seller to ensure the goods they are selling are of acceptable quality regardless of whether the goods are sold by auction, online, or in a bricks-and-mortar retail store. Consumers have ample opportunity to inspect goods in bricks-and-mortar stores, but they can still rely on their consumer guarantee rights if they purchase those goods – as well they should”.

2. Debt management firms, pre-insolvency advisers, payday loans etc

These have been on the Forum’s agenda for some time.  Ministers noted the recent progress of the Commonwealth Government in relation to payday lending and consumer leasing, and in regulating debt management firms.

The creation of the Australian Financial Complaints Authority (AFCA) is a significant reform.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the current Senate inquiry into ‘Credit and financial services targeted at Australians at risk of financial hardship’ also examine these issues.

The Ministers asked for further options to regulate debt management firms.

While the Senate inquiry into Credit and financial services might have been expected to consider and recommend further options, it has attracted little interest by way of submissions to date.  Submissions close on 9 November 2018.

3. Gift cards

The Consumer Affairs Ministers agreed out of session to amend the Australian Consumer Law to implement a national scheme for the regulation of gift cards such that:

  • gift cards and vouchers have a minimum three-year expiry period;
  • post-purchase fees are banned; and
  • gift cards prominently display their expiry date.

The Ministers further noted that consultation on the supporting regulations for exemptions from the gift card requirements are in train.

The Treasury Laws Amendment (Gift Cards) Act 2018 has amended the Competition and Consumer Act 2010 to effect these changes. The consultation on the regulations, under the draft Treasury Laws Amendment (Gift Cards) Regulations 2018, closed on 31 October 2018. My earlier comments are here.

New Zealand has similar laws proposed in its Fair Trading (Gift Card Expiry) Amendment Bill.  

Curiously, the Ministers agreed that the Chair of the Forum would write to the Commonwealth Attorney-General to

“consider the implications of Commonwealth insolvency and bankruptcy laws on unused gift cards”.

Given the division of responsibility for insolvency law and policy in Australia, Treasury may also like to be consulted.  In fact, most issues in relation to gift cards have arisen from corporate insolvencies, where the gift card holder is merely an unsecured creditor in the liquidation.

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