Christmas hamper provider Chrisco acted unfairly under Australian Consumer Law with its “headstart plan”, according to a Federal Court ruling.
The plan required customers to allow Chrisco to continue withdrawing funds from the customer’s account even after the customer had paid for the goods in full.
The “headstart” term would apply unless the customer opted out, with the money withdrawn from the customer’s bank account set aside for future orders.
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If the customer requested a refund for any additional money paid to Chrisco, the business would refund the amount without any interest.
Chrisco argued because of the demographic of its customers, the “headstart” term in its contracts benefited consumers because it allowed them to potentially pay for future orders in smaller instalments.
However, the Federal Court ruled on Tuesday the benefit to customers was “not substantial”.
“I consider that in all of the circumstance of the Headstart term and Chrisco’s contract, the term was unfair,” Justice James Edelman said in his ruling.
The Australian Competition and Consumer Commissioner Sarah Court said she hopes the judgment will be a warning to businesses thinking of doing the wrong thing.
“The court’s findings send a strong message to traders that they must comply with all of their obligations under the Australian Consumer Law,” Court said.
“Purchasing goods by way of a lay-by agreement is a convenient way to shop for many Australian consumers, particularly in the lead-up to Christmas. Businesses that use lay-by as a method of sale need to ensure that they are meeting their ACL obligations to their customers.”
Rohan Harris, partner at Russell Kennedy, told SmartCompany businesses must ensure they are treating consumers fairly and acting in accordance with their obligations under Australian Consumer Law.
“This is a perfect example, particularly with unfair contract term laws and the specific requirements around lay-by agreements,” Harris says.
“Those laws are there for this very scenario where it appears consumers may have been treated unfairly.”
Harris says businesses need to understand the competition watchdog likes consumers to get what they pay for, and will take action if it suspects that isn’t happening.
“I’m not surprised the ACCC pursued it,” he says.
“Again, you’ve got to look at what’s fair and what’s not fair.”
In a statement, Chrisco said customers can opt out of the “headstart” term.
“The headstart term in Chrisco’s 2015-16 agreements has been substantially reworded to make it clearer for customers,” Christco said.
“We are proud of the role that we play in helping our customers remove the stress and worry of big bills and debt so they can enjoy a magical Christmas.”