Telco giants oppose unfair contract laws

Telecommunications giants Telstra and Optus have both attacked the Government’s proposed plans for banning “unfair contract terms”, saying the changes will put many standard form contracts in jeopardy.

The Australian Retailers Association has also said that complying with the upcoming consumer credit legislation will cost the retail industry up to $760 million.

The changes, which are due to come into effect on 1 January 2010, will make void so-called ‘unfair contract terms’, such as unfair exit fees, penalty fees and clauses that permit one party to unilaterally change or cancel a contract.

The changes are intended to affect “standard form” contracts found in several sectors including finance, telecommunications, software, car rentals, subscription services and leases.

The parent company of Optus, Singapore Telecommunications, has spoken out against the changes in a statement saying that it is “highly concerned” by the consequences of the legislation.

It said the plan “suggests a lack of understanding of the nature of business-to-business transactions, which would impose enormous additional (and entirely unjustifiable) compliance costs on companies such as Optus, and would fundamentally undermine the effectiveness and efficiency of how business-to-business transactions are conducted”.

“Such an outcome would completely cut across the Government’s commitment…to reducing the regulator burden on business.”

Telstra also spoke out against the contracts in a submission to the Government.

“Significant uncertainty, unnecessary disruption and immense costs will result for small and large businesses alike.”

Meanwhile, the Australian Retailers Association has said that the upcoming Consumer Credit Protection Bill will force the retail industry to spend an estimated $760 million in training staff for new procedures.

Executive director Richard Evans said in a statement that the new laws will severely limit point-of-sale finance options through a third-party credit provider, and compliance costs could be up to $27,000 for each business.

“The new laws place the responsibility of assessing a customer’s ability to afford and properly manage a line of credit on the retailer, rather than the finance provider, which is totally unworkable from a retail perspective,” he said.

“This means retail staff would need to be trained, accredited, registered and licenced to offer credit assistance to the same level as finance brokers. This is an unnecessary burden on retailers and a double up of regulations that would already be imposed upon credit providers under the new regime.”

Evans also said that although the new laws are designed to protect consumers against “disreputable financial advisers and lenders”, the consequences may result in massive fines or criminal charges.

“The ARA is calling on the Federal Government to consult with retailers and the POS finance industry and impose new regulations at the credit provider level only. To ease the burden and cut costs for retailers the Government must reconsider the Consumer Credit Protection Bill and apply a general exemption to retailers.”

The franchise industry has also spoken out against the changes, with Franchise Council chief executive Steve Wright saying that most contracts within the industry are not standard forms, but variable contracts that often change over time.

So far, the Government has not excused the franchise industry from the upcoming legislation, potentially leaving thousands of contracts at risk of being declared void.