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Enhancements to Unfair Contract Term Protections - Regulation Impact Statement for Decision

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On 13 December 2019, Treasury released a Consultation RIS on Enhancements to Unfair Contract Term Protections. Submissions closed on 27 March 2020 and close to 80 submissions were received. Treasury also held consultation roundtables with a broad range of stakeholders.

Consultation update

Evidence gathered through the public consultation shows that unfair contract terms remain prevalent in standard form contracts and there is uncertainty around the scope of the existing protections.

On 6 November 2020, Commonwealth and state and territory consumer affairs ministers agreed to strengthen the existing unfair contract term protections in the Australian Consumer Law. Key reforms include:

  • making unfair contract terms unlawful and giving courts the power to impose a civil penalty
  • increasing eligibility for the protections by expanding the definition of small business and removing the requirement for a contract to be below a certain threshold
  • improving clarity on when the protections apply, including on what is a ‘standard form contract’.

These reforms will help reduce the prevalence of unfair contract terms in standard form contracts, and improve consumer and small business confidence when entering into contracts.

Further detail is outlined in the Legislative and Governance Forum on Consumer Affairs (CAF) meeting communique and in the Decision Regulation Impact Statement.

As a next step, Treasury will develop exposure draft legislation, which will provide a further opportunity for stakeholders to comment on the detail of the reforms.