Extending unfair contract terms to insurance, restricting cash payments and reforms to the way businesses handle consumer data are on the agenda in Canberra this week as Treasury officials unveil a slate of new industry consultations.
It’s been a busy week for Treasury. Officials have unveiled six new pieces of draft legislation in the last seven days, while the government is also working through its own to-do list, passing highly anticipated consumer data right laws which will, among other things, enable open banking, through the lower house.
Unfair contract terms for insurance
A planned extension of unfair contract terms (UCT) law to insurance is being discussed this week after Treasury yesterday opened a consultation, moving along recommendations made by the Hayne banking royal commission.
Under current laws, insurance contracts are exempt from provisions in consumer law which protect against ‘take it or leave it’ terms that could cause them detriment or are not necessary to protect providers.
Removing the exemption will boost protections for consumers and small businesses engaging with large insurance providers — an area of concern which was raised during the royal commission.
“We will continue to take the necessary steps to restore trust in Australia’s financial system,” Frydenberg said in a statement about the draft legislation circulated Tuesday.
The move has been welcomed by small business ombudsman Kate Carnell, who yesterday characterised the extension as a “logical step”.
Terms still not illegal
However, as SmartCompany has previously reported, the reforms don’t fix the key issue small business advocates and the ACCC have with the current unfair contract terms regime: it isn’t illegal.
The government has promised to strengthen UCT law and is holding regulatory impact consultation later this year, but has so far failed to commit to outlawing the terms.
Under the current rules, courts can void unfair contract terms but cannot hand down penalties for their use — a reality the ACCC has said makes it difficult to police the practice.
Carnell said yesterday the current regime causes access to justice issues for small businesses.
“While my office is able to resolve many contract disputes by using the unfair contract term provisions as a lever, on occasions when these negotiations fail, an SME is forced to seek a ruling through the courts,” she said.
“This is a very costly exercise for small businesses and larger companies have more resources to delay court proceedings until the SME either gives up or goes out of business.”
Insurance lobbyist not a fan
The Insurance Council of Australia (ICA), whose members include many of the largest insurance companies in the country, is not a fan of the draft legislation.
The lobby group says the laws will “create too much legal uncertainty and lead to poor consumer outcomes”.
ICA chief executive Rob Whelan said the narrow definition of insurance products contained within the draft legislation could have adverse consequences on his members.
“[It] makes almost every term in an insurance contract legally contestable,” he said in a statement circulated Tuesday.
“This will be passed on to consumers.”
Open banking reforms pass the lower house
In parliamentary news this week, the government has passed consumer data right laws through the lower house, bringing Australia one step closer to highly anticipated ‘open banking’ reforms.
Importantly for small businesses, the consumer data right legislation stands to change the way businesses deal with consumer data. Under the new laws, it will become easier for consumers to compare and switch between products and services.
The laws will first apply to the banking sector, but there are plans to expand it further, second to telecommunications and energy companies, and then to others.
The core aim of the new legislation is to give consumers the ability to access and use information about themselves more effectively, allowing them to make more informed decisions about themselves and the products they buy and use.
For businesses, this means the prospect of enabling customers fair access to the information they harvest in the hope they will also be able to share in the value of that data.
Restricting cash payments
Draft legislation has also been introduced to make it an offence to make or accept cash payments in excess of $10,000.
This is a black economy measure, designed to prevent unscrupulous actors from avoiding the creation of records when using large amounts of cash to pay for significant items.
Cash is increasingly being replaced by different types of electronic payments, which has given regulators confidence that further restrictions on the use of cash (in extreme instances) should crackdown on black economy activity without adversely affecting consumers.
The measures are a black economy taskforce recommendation and there will be exemptions in certain circumstances, but will generally mean businesses will no longer be able to accept cash payments exceeding $10,000.