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There are new disclosure obligations under the Fair Trading Act 1987 (NSW) for businesses to their ‘consumers’. There was an initial transitional period where the new obligations were not enforced, however it expired on 31 December 2020. Therefore, businesses must now ensure they are complying with the new consumer disclosure obligations. Under the new laws, businesses must make the following disclosures to customers prior to completing a sale:

  • the substance and effect of any terms which may “substantially prejudice” the interests of consumers;
  • commission or referral arrangements with another supplier when they recommend that a consumer buys goods or services from that third party supplier.

This article will explore: 

  • who these new obligations apply to; 
  • what the new obligations are; and 
  • what the penalties are for not complying.

Who Do These New Obligations Apply To?

These new consumer disclosure obligations will apply to conduct that:

  • is in connection with goods or services supplied in NSW;
  • affects a person in NSW; or
  • results in loss or damage in NSW

and that relates to a ‘consumer’.

What Is a Consumer?

A ‘consumer’ is defined under the Australian Consumer Law (ACL). It includes if the amount paid or payable for the goods or services:

  • does not exceed $40,000; or
  • exceeds $40,000 but the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption

From 1 July 2021, the definition of a ‘consumer’ will change. Additionally, the monetary threshold will increase from $40,000 to $100,000.

Term or Conditions That May Substantially Prejudice

Prior to supplying a consumer with goods or services, the business must take reasonable steps to ensure the consumer is aware of the substance and effect of any term or conditions that may substantially prejudice the interests of the consumer.

What ‘May Substantially Prejudice the Interests of the Consumer’?

Section 47A of the Fair Trading Act 1987 (NSW) outlines this and includes if the term:

  • excludes the liability of the supplier; or
  • provides that the consumer is liable for damage to goods that are delivered; or
  • permits the supplier to provide data about the consumer, or data provided by the consumer, to a third party in a form that may enable the third party to identify the consumer; or
  • requires the consumer to pay an exit fee, balloon payment or other similar payment.

The above is not an exhaustive list and businesses are required to disclose all terms that may substantially prejudice the interests of consumers.

Examples

Excluding the liability of the supplier

A trampoline park that includes in its terms with its customers that it is not liable for any injuries arising from participation in activities they provide.

The consumer is liable for damage to goods that are delivered

A removalist company that has a term in their contract that states the customer is liable for any damaged goods that are delivered and that the company is not liable for any loss or damage suffered by the customer.

Permits the supplier to provide data about the consumer, or data provided by the consumer, to a third party in a form that may enable the third party to identify the consumer

An online dating platform that allows them to disclose their customer’s personal information to other parties such as third party service providers or third parties that collect and process data, such as Google Analytics.

Requires the consumer to pay an exit fee,  balloon payment or other similar payment

An exit fee can also be known as a cancellation fee or termination fee and includes a fee if a consumer were to terminate or exit an agreement. For example, a gym membership that includes a cancellation fee to end the membership, or requires the payment of all fees up to the end of the membership period.


A balloon payment is a larger payment that is due at the end of paying off a loan, where the borrower pays smaller installments throughout the loan. For example, a car loan which requires a larger amount to be paid as the final instalment.

What Is ‘To Take Reasonable Steps’?

What is considered reasonable will depend on the business and what is considered appropriate in the circumstances. However, Fair Trading NSW has provided some guidance that includes that the business should:

  • be upfront with the consumer; 
  • not require the consumer to seek out the information; and 
  • draw the consumer’s attention to the terms and provide an explanation of the terms.

Furthermore, examples of taking reasonable steps include:

  • using short plain English summaries in an email when sending the contract to a client or on the front page of the contract; or
  • if the customer is accepting and making payment online, providing a short summary on the information or payment page

Additionally, to confirm the consumer has understood you can ask: 

  • for verbal confirmation; 
  • them to initial the contract where you have brought the terms to their attention; or
  • the customer to tick a box online next to the specific terms.

Commission and Referral Arrangements 

Intermediaries must take reasonable steps to make consumers aware of any commission or referral arrangement where the business receives a financial incentive from another supplier. Intermediaries do not have to disclose the nature or value of the incentive, just that a financial incentive exists. Further, the disclosure must be made prior to the intermediary acting under the arrangement in which they receive the incentive fee. The requirement to disclose includes transactions that occur online where one of the parties to the arrangement is from interstate.

Penalties 

The penalties are high for non-compliance with these new consumer disclosure obligations, so it is essential you ensure you are compliant. Penalties include: 

  • $110,000 for corporations; and
  • $22,000 for individuals

Key Takeaways

There are hefty penalties for not complying with the new NSW disclosure obligations, which include disclosing the following to ‘consumers’ prior to completing a sale:

  • the substance and effect of any terms which may “substantially prejudice” the interests of consumers;
  • commission or referral arrangements with another supplier when they recommend that a consumer buys goods or services from that third party supplier.

If you need assistance ensuring that you understand your obligations, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form below.

Frequently Asked Questions

What are the new consumer disclosure obligations?

Under the new laws, businesses must make disclosures to customers prior to completing a sale. These disclosures include the substance and effect of any terms which may “substantially prejudice” the interests of consumers and any commission or referral arrangements with another supplier when they recommend that a consumer buys goods or services from that third party supplier.

Who do the obligations apply to?

These new consumer disclosure obligations will apply to conduct that: is in connection with goods or services supplied in NSW, affects a person in NSW or results in loss or damage in NSW. Additionally, it must relate to a ‘consumer’.

What are the penalties for non-compliance?

The penalties for not complying with these new consumer disclosure obligations are high. They include $110,000 for corporations and $22,000 for individuals. Therefore, you should ensure that you comply with your obligations.

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