Telecommunications Industry Ombudsman Submission on the Australian Consumer Law draft Regulations. October 2010

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3 Telecommunications Industry Ombudsman Submission on the Australian Consumer Law draft Regulations

4 Telecommunications Industry Ombudsman Contents About the TIO 1 The Australian Consumer Law draft Regulations 2 Unsolicited Consumer Agreements business contracts 2 Unsolicited Consumer Agreements renewal of contracts of the same kind 3 Unsolicited Consumer Agreements voluntary contact with the same supplier 3 Prescribed information for Unsolicited Consumer Agreements 4 Page i

5 Telecommunications Industry Ombudsman About the TIO The Telecommunications Industry Ombudsman (TIO) is a free and independent alternative dispute resolution service for small business and residential consumers in Australia who have a complaint about their telecommunications services. We aim to resolve these complaints quickly in a fair, independent and informal way, having regard not only to the law and to good industry practice, but also to what is fair and reasonable in all the circumstances. Before the TIO becomes involved in a complaint, the service provider is given the first opportunity to resolve the complaint with its customer. The TIO is the largest industry Ombudsman Scheme in Australia we receive an average of 5,000 to 6,000 calls each week and record around 150,000 to 170,000 new complaints each year 1. Over the past three years, we have helped between 120,000 and 150,000 residential consumers and small businesses, each year, to resolve complaints with their telecommunications service providers. Most complaints to the TIO are resolved quickly and effectively through a process of referral to designated contact points within the service providers, or by the TIO facilitating a fair and reasonable outcome between the two parties. Complaints that cannot be resolved by facilitation are escalated for formal investigation by the TIO. If the complaint remains unresolved after formal investigation and the TIO is of the view that it would be fair and reasonable to do so, the TIO can make binding determinations up to a value of $30,000 and non-binding recommendations up to a value of $85,000 in respect of each complaint. We are independent of telecommunications companies, consumer groups and government. However, we provide information and assistance to regulators or other organisations where this is required by law or where this will help the industry and consumers to resolve complaints. Further information about the TIO is available at We record complaints according to the types of issues that these complaints present. These include provisioning/connection delays, credit management disputes, contractual disputes, customer service/complaint handling and billing disputes. Every complaint involves at least one complaint issue. Some complaints can involve multiple complaint issues for example, a complaint about a delay in rectifying a faulty landline service may also involve a claim that the consumer s complaint about this fault was not acknowledged or escalated (a complaint handling issue). TIO complaints are broadly classified according to service types internet, mobile, landline and mobile premium services (MPS) and are investigated according to the types of issues they present. More information about TIO complaints and complaint issues is available at 1 A complaint is defined as an expression of grievance or dissatisfaction about a matter within the TIO s jurisdiction that the TIO Member concerned has had an opportunity to consider. Page 1

6 The Australian Consumer Law draft Regulations Telecommunications Industry Ombudsman The TIO broadly supports the main areas of reform introduced by the Australian Consumer Law (ACL), particularly those provisions that relate to unfair contract terms, consumer guarantees, unsolicited consumer agreements, enforcement and remedies. The TIO looks forward to the implementation of the national framework for consumer protection as we believe this will address the current divergence in regulation of these practices. We have, however, some comments on the proposed draft Regulations that we outline below. Our submission on the following issues is informed by the complaints made to the TIO, and some of the problems that we have seen consumers particularly small business consumers experience when purchasing telecommunications goods or services. As such, we have only commented on the issues that are of relevance to, or within the expertise of, the TIO. Unsolicited Consumer Agreements business contracts We note that the draft Regulations propose to exempt business contracts (defined as a contract for the supply of goods or services other than goods or services of a kind that are ordinarily acquired for personal, domestic or household use or consumption) from the protections in the ACL dealing with unsolicited consumer agreements. As previously highlighted in our submission to the Standing Committee of Officials of Consumer Affairs (SCOCA) on the Discussion Paper on An Australian Consumer Law: Fair Markets Confident Consumers, we believe that there is merit in ensuring that the definition of consumer covers a wider range of transactions particularly where the contractual obligations have significant impact on small businesses. A copy of our submission dated 17 March 2009 is available at Whilst it may be appropriate for the protections of the ACL dealing with unsolicited consumer agreements to exclude some business contracts, we believe that these protections may still be necessary for small business consumers. We sometimes receive complaints from small business consumers who have been sold telecommunications services bundled with equipment leases on four to five year fixed term contracts, without being given the option of a cooling off period. In circumstances where small businesses are not given an opportunity to consider such contracts, significant detriment may result. This is because such bundled agreements can be difficult to interpret and the financial obligations attached to equipment leases are typically substantial. These small business consumers find themselves locked into a long fixed term contract for the telecommunications services and a financial lease for equipment that may become obsolete much sooner. Page 2

7 Telecommunications Industry Ombudsman In our experience, small businesses do not always have the resources to negotiate contracts which suit their needs and some small businesses subsequently find themselves in positions of unequal bargaining power. We believe that a modified definition of business contracts in draft regulation 81(4) one that clearly does not include small businesses may be an alternative approach to balancing the needs of larger businesses and conferring adequate protection on small business consumers. Unsolicited Consumer Agreements renewal of contracts of the same kind We sometimes receive complaints from consumers or small businesses in relation to the automatic renewal of their telecommunications contracts. This may happen without contact from the service provider or without prior notice of the automatic renewal. In this respect, the TIO has observed instances where contracts are renewed for a consecutive fixed term and where the consumer or small business was not made aware at the point of renewal. We suggest that draft regulation 81(6) which defines subsequent contract of the same kind should include a requirement that the subsequent contract is one that is not an automatic renewal of the existing unsolicited consumer agreement, but rather is based on further negotiations and contact between the parties. Unsolicited Consumer Agreements voluntary contact with the same supplier We acknowledge that a consumer or small business may discontinue an unsolicited contact with a supplier and then subsequently choose to contact the same supplier to purchase the goods or services. We have however, come across complaints where consumers claim that their subsequent contact with the service provider was to clarify an unanticipated bill or correspondence, and they were then influenced into purchasing a telecommunications service. We have also seen instances of telemarketing conduct where messages are left asking the consumer to contact a number or return a call, and when this occurred, the supplier proceeded to influence the consumer to purchase its goods or services. We suggest that draft regulation 81(7) could be clarified to exclude situations where the consumer is led by some actions of the supplier into contacting the supplier after having discontinued negotiations for an unsolicited consumer agreement. Page 3

8 Telecommunications Industry Ombudsman Prescribed information for Unsolicited Consumer Agreements In addition to information about cooling off periods that must be provided to a consumer in circumstances of unsolicited consumer agreements, we suggest that the following information may need to be prescribed: a summary of the key terms of the unsolicited consumer agreement any early termination fees that may apply if the agreement is terminated early the duration of the unsolicited consumer agreement the total price for the goods or services over the duration of the unsolicited consumer agreement. The above information would need to be disclosed in a clear, legible and easy to understand manner, and could be included in the front page of the agreement (for written agreements) or the agreement documents that are provided after negotiations over the telephone. Page 4