Consumer rights Reforming statutory implied conditions and warranties

6 Awareness of the law

Key points There is a general lack of awareness of statutory implied terms amongst not only consumers but also retailers and manufacturers. Consumers rely on personal and technical sources, rather than government consumer agencies, for advice about consumer issues. Raising the knowledge and awareness of consumers, retailers and manufacturers is fundamental to reducing consumer detriment. Information needs to be simple, clear, and targeted to recognise the diverse needs of consumers; provided at the right point in the consumer’s decision making process; available in a range of formats; and shared between consumers, retailers and manufacturers.

The problem of lack of awareness

A recurring theme throughout the review has been lack of awareness of statutory implied terms. The NEIAT study and submissions to the review support the Issues Paper in suggesting that a key problem with the current statutory implied terms regime is a lack of awareness by consumers, retailers and manufacturers of their rights and obligations.

Consumer awareness of statutory conditions and warranties is low. The NEIAT study found that seven in ten consumers, when read a succinct definition of statutory warranties, were not aware that such rights existed.

The need to remedy the widespread ignorance of consumer rights and remedies is supported by many submissions, including one from Hunt & Hunt. It not only supports the need to improve consumer awareness, but stresses the importance of standardised information in explaining statutory implied terms and a customer’s rights against the retailer.⁸⁵

Consumers, however, are not alone in their lack of understanding. The NEIAT study indicates that 57 per cent of retailers and 47 per cent of manufacturers were not aware that consumers were entitled to any remedies beyond those for breach of the manufacturer’s warranty. Further, one in five traders did not consider that they were subject to any legal obligation to give refunds on faulty products when sought by consumers. In addition, 15 per cent of retailers thought that, beyond the manufacturer’s express warranty, the only available protection for consumers was their own insurance.

The Australian Retailers Association (ARA) drew attention to widespread ignorance by consumers as to their entitlement to a refund. It noted that:

[t]he ARA believes consumers are very quick to assert their rights but aren’t necessarily clear about their obligations including: reporting the fault and returning the goods; providing details of the fault and their chosen remedy; providing proof of purchase; and ceasing to use faulty goods until they can be returned.

The ARA understands this may be due to the various refund policies implemented by retailers across the country that confuse consumers who are unclear about the difference between their legal rights and other retail policies that may go above and beyond the law.

Retailers would benefit from education and staff training programs regarding the laws surrounding statutory implied terms.⁸⁶

Support for consumers

While consumer protection agencies in Australia, such as the ACCC and the state and territory offices of fair trading, maintain websites and produce publications about the different types of warranties⁸⁷, it is clear that the message is still not getting through to the intended audience. This view is supported by Spier Consulting, which considered that consumer agencies have conducted some education, but not enough.⁸⁸

In its 2008 Review of Australia’s Consumer Policy Framework, the Productivity Commission concluded that ‘most consumers are not fully aware of the protections and redress options available under the implied warranty provisions’.⁸⁹ The review recommended that consumer agencies in Australia ‘raise awareness among consumers and suppliers about the statutory rights and responsibilities conferred by the implied warranties and conditions in the generic consumer law’.⁹⁰

The Australian Competition and Consumer Commission has recently released a range of new publications in an attempt to educate consumers and suppliers about their statutory rights and responsibilities in relation to implied conditions and warranties. However, the continued level of complaints and inquiries suggests that the lack of consumer awareness remains an issue.

The importance of consumer awareness was highlighted by the NEIAT study. It demonstrated that when consumers had a greater understanding of statutory rights it lowered consumer detriment. This was evident in the number of hours different consumer groups spent on addressing their product problems. Average hours ranged from 3.7 hours for consumers with a detailed knowledge of their rights, to 5.8 hours for consumers with partial awareness and as high as 6.1 hours for consumers with no awareness at all.

Further, the NEIAT study showed that increased awareness of statutory rights had flow on effects. When consumers were offered an extended warranty with a thorough knowledge of their statutory rights, they felt they were being asked to pay for something that they already had the right to expect.

It is also clear that consumers have a poor understanding of where to go for help or information on the existence and enforcement of their rights (that is, awareness of consumer agencies). The NEIAT study demonstrated that consumers rely heavily on personal and technical sources of advice and that government agencies play a relatively limited role at present. Figure 6.1 outlines where consumers sought advice when they did not get redress.

Figure 6.1: Whom consumers sought advice from when they did not get redress

Asked of: All consumers who sought advice

Q18: Whom did you seek advice from?

Source: NEIAT study, page 60.

The range of government agencies available for support appear to have been used by very few of the affected consumers. This view is also supported by the LCA, which outlined the complementary nature of consumer protection laws and consumer awareness programs. The LCA considered that:

[t]o date, the Government has not provided tangible evidence of the need for new or additional laws in this area, nor evidence that existing laws (including sections 52 and 53(g)/75AZC(1)(k)) are not capable of providing sufficient protection to consumers if awareness and enforcement are boosted. Accordingly, the Committee is not persuaded that the current TPA regime should be amended substantially or that additional regulation should be introduced in this area; the focus of the Government’s inquiry should be on education rather than regulation.⁹¹

It is also clear that the issue of awareness closely relates to the lack of clarity surrounding the law itself. As Professor Carter notes,

[i]t is certainly true that consumers do not understand the TPA. However, that is largely a function of its drafting.⁹²