Application by Flexigroup Limited (No 2)
[2020] ACompT 2
•15 September 2020
AUSTRALIAN COMPETITION TRIBUNAL
Application by Flexigroup Limited (No 2) [2020] ACompT 2
Review from: Application for authorisation AA1000439 lodged by Australian Energy Council, Clean Energy Council, Smart Energy Council and Energy Consumers Australia in respect of the New Energy Tech Consumer Code File number: ACT 1 of 2019 Tribunal: O'BRYAN J (Deputy President)
DR J WALKER (Member)
MS D EILERT (Member)Date of Determination: 15 September 2020 Date of publication of reasons: 28 September 2020 Catchwords: COMPETITION AND CONSUMER – review under s 101 of the Competition and Consumer Act2010 (Cth) of authorisation granted by the Australian Competition and Consumer Commission – voluntary code of conduct for suppliers of New Energy Tech (including solar panels) for residential and small business use – code of conduct restricts the offer of unregulated consumer credit (including buy now pay later) in connection with unsolicited sales of New Energy Tech – code of conduct stipulates conditions in relation to the offer of unregulated consumer credit (including buy now pay later) in connection with unsolicited sales of New Energy Tech – under the code of conduct, suppliers must comply with mandatory standards prepared by Code Administrator – where code of conduct likely to give rise to public benefits but also likely to give rise to public detriments – where public detriments can be removed or reduced by conditions of authorisation requiring amendments to the code of conduct – whether appropriate to impose conditions of authorisation relating to reporting – determination of the Australian Competition and Consumer Commission varied Legislation: Competition and Consumer Act 2010 (Cth) Schedule 2 (Australian Consumer Law)
Competition and Consumer Act 2010 (Cth), ss 45AD, 45, 46, 47, 88, 90, 91B, 91C, 101, 102, 109
Australian Securities and Investments Commission Act 2001 (Cth)
Corporations Act 2001 (Cth)
National Consumer Credit Protection Act2009 (Cth)
National Consumer Code
National Consumer Credit Protection Regulations 2010 (Cth)
Parliamentary Privileges Act 1987 (Cth)
Privacy Act 1988 (Cth)
Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 (Cth)
Cases cited: Application by Medicines Australia Inc [2007] ACompT 4; ATPR ¶42-164
Herald & Weekly Times Ltd (1978) 17 ALR 281
Re 7-Eleven Stores Pty Ltd [1994] ATPR ¶41-357
Re 7-Eleven Stores Pty Ltd [1998] ACompT 3; ATPR ¶41‑666;
Re Media Council of Australia Authorisation (1987) 88 FLR 1; [1987] ATPR ¶40-774
ReQueensland Co-operative Miling Association Ltd (1976) 25 FLR 169; [1976] ATPR ¶40-012
Date of hearing: 9 – 12 June 2020 Registry: Victoria Category: Catchwords Number of paragraphs: 426 Counsel for the Applicant: Mr N De Young SC with Ms C van Proctor Solicitor the Applicant: Clayton Utz Counsel for the Authorisation Applicants: Mr D Preston Solicitor for the Authorisation Applicants: Allens Counsel for Australian Competition and Consumer Commission: Dr R Higgins SC with Mr C Tran Solicitor for Australian Competition and Consumer Commission: Australian Government Solicitor Counsel for Australian Securities and Investments Commission: Mr M D Tehan Solicitor for Australian Securities and Investments Commission: Mr J Walker, Australian Securities and Investments Commission Counsel for RateSetter Australia RE Limited: Mr A Barraclough Solicitor for RateSetter Australia RE Limited: Johnson Winter & Slattery Counsel for Consumer Action Law Centre: Mr T Clarke with Mr M Peckham Solicitor for Consumer Action Law Centre: Consumer Action Law Centre IN THE AUSTRALIAN COMPETITION TRIBUNAL
ACT 1 of 2019 RE: APPLICATION FOR AUTHORISATION AA1000439 LODGED BY AUSTRALIAN ENERGY COUNCIL, CLEAN ENERGY COUNCIL, SMART ENERGY COUNCIL AND ENERGY CONSUMERS AUSTRALIA IN RESPECT OF THE NEW ENERGY TECH CONSUMER CODE
BY: FLEXIGROUP LIMITED
Applicant
TRIBUNAL:
O’BRYAN J (Deputy President)
Dr J WALKER (Member)
Ms D EILERT (Member)
DATE OF DETERMINATION:
15 SEPTEMBER 2020
THE TRIBUNAL DETERMINES THAT:
1.The determination of the Australian Competition and Consumer Commission dated 5 December 2019 granting conditional authorisation to application AA1000439 made by the Australian Energy Council, Clean Energy Council, Smart Energy Council and Energy Consumers Australia (together, the authorisation applicants) is varied as follows:
(a)the authorisation applies to the following conduct:
(i)the authorisation applicants and future signatories to the New Energy Tech Consumer Code (Code) becoming signatories to, agreeing to comply with and giving effect to the provisions of the Code;
(ii)the persons constituting the Administrator and Code Monitoring and Compliance Panel from time to time performing the functions and powers given to them under the Code;
(b)the conditions of authorisation specified by the Australian Competition and Consumer Commission are replaced by the conditions set out in Annexure B to this determination; and
(c)the authorisation remains in force for a period of 5 years from the date of this determination.
2.The reasons for determination of the Tribunal in this proceeding are not to be disclosed to any person other than the external legal representatives of the parties in order that any party may make an application to redact or suppress any part of the reasons on the grounds of commercial confidentiality, any such application to be filed and served on or before 4pm on 25 September 2020. If no application is made by that time, the Tribunal will publish its reasons in full. If any application is made within that time, the Tribunal will determine the question of publication in the resolution of that application.
SUMMARY OF DETERMINATION
The determination made by the Tribunal today concerns a proposed industry code of conduct for suppliers of what are referred to as New Energy Technology products (principally solar panels, energy storage systems and other emerging products and services). To assist the public in understanding the Tribunal’s determination, the Tribunal has prepared this brief summary of the determination. The summary is not a substitute for, or a qualification of, the published reasons of the Tribunal.
The proposed code of conduct was developed by the Australian Energy Council, Clean Energy Council, Smart Energy Council and Energy Consumers Australia. It sets minimum standards that suppliers of New Energy Technology products must comply with when interacting with customers, from initial marketing and promotion through to installation and complaints handling. The proposed code of conduct is a voluntary code. Suppliers of New Energy Technology products can elect whether they wish to become signatories. However, once a supplier becomes a signatory, the supplier agrees to comply with the requirements of the code.
The proponents of the code have applied for authorisation under the Competition and Consumer Act 2010 (Cth). Authorisation provides an exemption from the application of the competition laws in that Act. The Tribunal must only grant authorisation if it is satisfied that the conduct would result, or be likely to result, in a benefit to the public and the benefit would outweigh the detriment to the public that would result, or be likely to result, from the conduct.
The proposed code of conduct is a form of industry self-regulation. While industry codes of practice, as a form of private regulation, have become common place in Australia, they have the potential to generate both public benefits and detriments. Benefits will arise when codes of practice complement public regulation in ways that reflect community attitudes and expectations and deal with market failures (that is, where markets would otherwise fail to result in an efficient allocation of resources). Anti-competitive public detriment will arise when codes of practice give their participants power to bring about market outcomes that differ from competitive market outcomes and result in restrictions on the types of products that may be supplied, the quantity that may be supplied or the methods or channels of supply. Such restrictions substitute collective supplier preference for consumer choice and would only be justified if required to address demonstrable market failure. Absent significant market failure, competition can generally be relied on to promote the interests of consumers and the community at large. Public regulation which imposes restrictions on competition, where those restrictions are seen to be necessary to achieve community benefits, are expressed and scrutinised through the democratic process of government. Private regulation which imposes restrictions on competition has the potential to result in significant public detriment by restricting market access, innovation and the offers available to consumers. The proponents of such restrictions need to demonstrate that they are likely to result in sufficient public benefit to justify exempting the restrictive conduct from the normal application of the Competition and Consumer Act.
Many of the provisions of the proposed code reflect existing consumer protection laws that are applicable to suppliers of New Energy Technology products. The Tribunal has concluded that those provisions generate public benefits because the code is likely to lead to greater compliance with those laws. The code of conduct will be publicised and provided to consumers and the code provides for oversight by an industry body and dispute resolution processes. There are also many provisions of the proposed code that extend or amplify consumer protection laws that apply to suppliers of New Energy Technology products. The Tribunal considers that those provisions also generate net public benefits. Even if the enhanced obligations were to increase supply costs, the Tribunal considers that the obligations reflect community expectations of the standard of commercial conduct by suppliers and the community would therefore accept any associated increase in the cost of supply. The code is also likely to improve the information made available to consumers, enhancing consumers’ ability to make informed choices that suit their needs and thereby enhancing competition in the supply of New Energy Technology products. In that way, the code addresses a market failure arising from information asymmetry.
However, the Tribunal has concluded that other provisions of the proposed code are likely to generate significant public detriments. Those provisions concern two topics. The first topic relates to the supply of consumer credit that is not regulated by the National Consumer Credit laws, particularly the supply of “buy now pay later” credit. The second topic relates to provisions of the proposed code that empower the administrator of the code to stipulate mandatory standards with which suppliers must comply.
In relation to unregulated consumer credit (which includes “buy now pay later” products), the proposed code places a number of restrictions on the ability of suppliers of New Energy Technology products to offer such credit in connection with the sale of the New Energy Technology products. The code prohibits the offer of such credit if the New Energy Technology product was sold as a result of the supplier initiating contact with the customer (an unsolicited sale). The code also prohibits the offer of such credit unless the credit provider has implemented procedures equivalent to the responsible lending obligations under the National Consumer Credit laws.
The Tribunal considers that unregulated consumer credit in the form of “buy now pay later” finance is a significant and popular form of finance used by consumers to acquire New Energy Technology products desired by those consumers and therefore the supply of such finance provides economic benefits. The evidence does not establish that the provision of such finance in connection with the supply of New Energy Technology products generates material consumer harm. The data before the Tribunal indicates that arrears and defaults are significantly lower for all types of finance extended in the New Energy Technology sector compared to other sectors, which is likely due to the nature of the product (which generates energy cost savings) and the demographics of the consumers (older home-owners). To the extent that such finance might facilitate consumer harm which is caused by poor or unlawful selling practices in respect of New Energy Technology products, the risk of such harm should be materially reduced by the consumer protection provisions of the proposed code. The Tribunal considers that most of the proposed restrictions on the supply of “buy now pay later” finance in the proposed code will generate substantial public detriments by reducing the availability of such finance to consumers, thereby reducing consumer access to NET products. ASIC has been actively considering whether the National Consumer Credit laws should be extended to cover “buy now pay later” products. ASIC’s review of the sector will have more evidence before it to consider whether such an extension is warranted.
In relation to the mandatory standards, the Tribunal is concerned about the open ended nature of the provisions in the proposed code, the potential effect of which is uncertain, but which could be used to restrict supply and competition. An agreement between competitors to abide by agreed mandatory standards could be used to restrict innovation and competitive offers by solar panel merchants in the future. This could result in unknown public detriments arising in the future, making it difficult for the Tribunal to be satisfied that the overall balance of public benefits and detriments arising from the code meets the test for authorisation. The Tribunal has concluded that the code should be amended to remove all references to mandatory standards.
The Tribunal has weighed the overall public benefits of the consumer protection provisions of the code against the public detriments that the Tribunal considers will arise from the provisions of the code concerning unregulated consumer credit and mandatory standards. The Tribunal considers that the latter outweigh the former. In other words, the Tribunal is not satisfied that the code, in its present form, would be likely to result in a net public benefit. Accordingly, the Tribunal is not willing to authorise the code in the form submitted to the Tribunal. However, with amendments to the code that remove the provisions that are likely to cause public detriment (which amendments are set out in Annexure B to the determination), the Tribunal would be satisfied that the code would be likely to result in a net public benefit. Accordingly, the Tribunal is willing to grant authorisation subject to a condition that the code is so amended.
REASONS FOR DETERMINATION
[Redacted version]
INTRODUCTION
[1]
BACKGROUND TO THE AUTHORISATION
[17]
The residential solar panel sector
[17]
The development of the NET Code
[26]
Regulated and unregulated consumer credit
[31]
ASIC Report 600
[53]
AFIA Code of Practice for BNPL providers
[62]
OVERVIEW OF THE NET CODE
[65]
Part A
[69]
Part B
[70]
Annexure
[96]
THE APPLICATION TO THE ACCC FOR AUTHORISATION
[103]
Versions of the Code submitted by the authorisation applicants
[108]
ACCC’s assessment of public benefits
[120]
ACCC’s assessment of public detriments
[126]
Authorisation subject to conditions
[129]
THE APPLICATION TO THE TRIBUNAL FOR REVIEW
[133]
OVERVIEW OF THE PARTIES AND THE EVIDENCE
[142]
The authorisation applicants
[142]
Flexigroup
[154]
ASIC
[175]
RateSetter
[181]
CALC
[193]
Third party submissions
[219]
Tribunal’s data request
[233]
GENERAL CONSIDERATION OF THE EFFECTS OF THE NET CODE
[253]
PROVISIONS THAT REFLECT OR AMPLIFY CONSUMER PROTECTION LAWS
[274]
PROVISIONS CONCERNING UNREGULATED CONSUMER CREDIT
[284]
Overview
[284]
The parties’ submissions
[292]
Consideration of the consumer finance provisions
[327]
Summary of conclusions
[396]
PROVISIONS CONCERNING MANDATORY STANDARDS
[398]
SHOULD AUTHORISATION BE GRANTED?
[407]
REPORTING OBLIGATIONS
[411]
CONCLUSION
[422]
THE TRIBUNAL
1. INTRODUCTION
On 30 December 2019, Flexigroup Limited (Flexigroup) filed an application pursuant to s 101 of the Competition and Consumer Act2010 (Cth) (CCA) for a review of an authorisation granted by the Australian Competition and Consumer Commission (ACCC) under s 88(1) of the CCA on 5 December 2019 (ACCC determination).
The applicants for the authorisation were the Australian Energy Council, Clean Energy Council, Smart Energy Council and Energy Consumers Australia (together, the authorisation applicants). The authorisation concerned a document called the New Energy Tech Consumer Code (NET Code or Code) which sets minimum standards that suppliers of “New Energy Tech” products (principally solar panels, energy storage systems and other emerging products and services) (NET products) must comply with when interacting with customers, from initial marketing and promotion through to installation and complaints handling. A copy of the NET Code in the final form in which the authorisation applicants sought authorisation from the ACCC, and which is the subject of this review, is attached as Annexure A to this determination.
The authorisation granted by the ACCC determination enables the authorisation applicants and future signatories to the NET Code to agree, sign up to and comply with provisions of the Code. Signatories to the Code commit to abide by minimum standards of good business practice as set out in the Code. The Code also contains provisions for monitoring and sanctioning non‑compliance by signatories, and the Administrator of the Code has powers to require a signatory to rectify breaches. Where there is serious non-compliance, the Administrator may propose to the Code Monitoring and Compliance Panel that the signatory be suspended or expelled. In accordance with s 88(1) of the CCA, the authorisation expressly exempted the authorisation applicants and signatories to the Code from the following provisions in Part IV of the CCA in so far as they engage in the conduct described in the authorisation: s 45AD (cartel conduct), s 45 (contracts, arrangements or understandings that restrict dealings or affect competition, including concerted practices), s 46 (misuse of market power) and s 47 (exclusive dealing).
The NET Code is a voluntary code. Suppliers of NET products can elect whether they wish to become signatories. However, once a supplier becomes a signatory, the supplier agrees to comply with the requirements of the Code. While the Code does not, of itself, have the force of law, the Code requires signatories to include in their customer quotes and contracts a promise to comply with the Code. By that mechanism, the obligations under the Code are incorporated into customer contracts and become enforceable by customers against signatories. Thus, it can be expected that signatories to the Code would enjoy a considerable marketing and branding advantage by reason of the additional consumer protection obligations they undertake and there will be a corresponding degree of commercial pressure for suppliers of NET products to become signatories to the Code. It is also possible that, in the future, the availability of government subsidies or incentives for NET products will be restricted to products supplied by Code signatories, creating further commercial pressure for suppliers of NET products to become signatories.
While the NET Code is a voluntary code, it is nevertheless a form of industry self-regulation. NET providers who become signatories will form a body of suppliers, able to market and present themselves as signatories, and who agree to comply with the business and trading practices stipulated by the Code. The potential for industry codes of conduct, as a form of self‑regulation, to have anti-competitive effects is discussed later in this determination.
The application for review by Flexigroup principally concerns provisions of the NET Code governing the offer of deferred payment arrangements (consumer credit) that are not regulated under the National Consumer Credit Protection Act2009 (Cth) (NCCP Act) and the National Credit Code in connection with the supply of NET products. A growing area of “unregulated” consumer credit, both for NET products and consumer goods more generally, is known as “buy now pay later” (BNPL) finance. BNPL providers in the NET market include Flexigroup, Brighte Capital Pty Ltd (Brighte) and Devizo Pty Ltd which trades as Payright. In this determination, we will use the expression “unregulated consumer credit” when referring to consumer credit that is not regulated by the NCCP Act and National Credit Code such as BNPL finance. However, and as discussed in more detail below, we note that such credit arrangements are not completely unregulated and are subject to various consumer protection laws, including those in the Australian Consumer Law (being Schedule 2 of the CCA) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), as well as recently enacted “product intervention powers” granted to the Australian Securities and Investments Commission (ASIC) under Part 7.9A of the Corporations Act 2001 (Cth) (Corporations Act) (which commenced in April 2019) and the “design and distribution obligations” to be imposed by Part 7.8A of the Corporations Act (which will commence in October 2021).
The effect of the NET Code as authorised by the ACCC (when read with the conditions of authorisation imposed in its determination) in respect of unregulated consumer credit is that:
(a)signatories must not offer customers unregulated consumer credit in connection with the sale of a NET product if the sale of the NET product is unsolicited (see para 3(d) of the Code when read with the condition in paragraph 5.13 of the ACCC determination); and
(b)signatories may only offer unregulated consumer credit in connection with the sale of a NET product if (amongst other things) the Administrator under the NET Code has either:
(i)determined that the credit provider is a signatory to an industry code of conduct that requires the credit provider to comply with (on an equivalent basis) the responsible lending, hardship and dispute resolution provisions of the NCCP Act; or
(ii)approved the credit provider’s deferred payment contract as an interim measure (being an interim measure that expires on 1 January 2022),
(see para 25(a)(ii) of the Code when read with the condition in paragraph 5.12 of the ACCC determination).
Flexigroup is a financial services group providing a range of finance products to consumers and businesses including interest free cards and no interest payment plans to retail customers through its product “humm” which is a form of BNPL finance. In the period since 1 January 2010, Flexigroup's humm product has financed the purchase of more than 210,000 solar product installations in Australia, being approximately 9% of all solar installations in Australia. By its application, Flexigroup seeks the review of the authorisation of those provisions of the NET Code and the ACCC’s conditions of authorisation that relate to unregulated consumer credit summarised above (unregulated consumer credit provisions). Flexigroup seeks to maintain the authorisation of the NET Code, but subject to conditions of authorisation that require the deletion or amendment of the unregulated consumer credit provisions.
As the proponents of the NET Code, the authorisation applicants support its authorisation. However, over the course of the review, the support of the authorisation applicants for the unregulated consumer credit provisions changed. In particular, by the conclusion of the review, the authorisation applicants no longer supported para 3(d) of the Code (and the associated ACCC condition).
On 16 March 2020, the Tribunal gave leave to the following persons to intervene in this proceeding pursuant to s 109(2) of the CCA: ASIC, the Consumer Law Action Centre (CALC) and RateSetter Australia RE Limited (RateSetter). Each of the interveners has an interest in the unregulated consumer credit provisions.
ASIC is responsible for the regulation of financial products and has recently conducted a study of the BNPL sector (ASIC Report 600 dated November 2018). ASIC supported the authorisation of the NET Code and the conditions imposed by the ACCC in its determination in relation to unregulated consumer credit.
CALC is an independent, not-for-profit consumer organisation with specialist expertise in consumer credit law and policy. It provides financial counselling and legal assistance services to people experiencing disadvantage in Victoria. It has acted for clients who have acquired NET products using unregulated consumer credit. CALC supports the authorisation of the NET Code, but considers that the Code should prevent the offer of unregulated consumer credit in connection with NET products in all circumstances. In the alternative, it supports the condition of authorisation imposed by the ACCC that NET merchants must not offer unregulated consumer credit in connection with an unsolicited sale of NET products. It also submitted that, if the Tribunal were concerned about differential treatment between regulated and unregulated consumer credit in the context of unsolicited sales, the Code should prevent merchants from offering any form of finance in connection with unsolicited sales.
RateSetter supplies regulated consumer credit including in the NET sector and is therefore a competitor of Flexigroup and other providers of unregulated consumer credit. It does not supply unregulated consumer credit. RateSetter supports the authorisation of the NET Code. In broad terms, it supports the conditions imposed by the ACCC in relation to unregulated consumer credit. It also supports CALC’s submission that, if there is a concern about differential treatment between regulated and unregulated consumer credit in the context of unsolicited sales, the Code should prevent the offer of any form of finance in connection with unsolicited sales. Without intending any criticism, it can be observed that RateSetter’s views are to the benefit of its commercial interests by (i) restricting the supply of unregulated consumer credit (in connection with the supply of NET products) which is a financial product that competes with its regulated consumer credit products, and (ii) restricting the supply of consumer credit in connection with unsolicited sales of NET products which is a sales channel it does not participate in. This highlights a principal concern of the Tribunal, which is whether the NET Code would restrict the supply of goods or services to the detriment of consumers.
Appropriately, the ACCC assisted the Tribunal in the review in an impartial manner. Given the presence of contradictors in the review, it was unnecessary for the ACCC to test the evidence before the Tribunal, present contrary material or make submissions putting forward an opposing point of view. The Tribunal is grateful for the submissions advanced by the ACCC which have been helpful in the analysis of the issues.
Even though no participant in the review opposed the authorisation of the NET Code, as the Tribunal is conducting a de novo review of the grant of authorisation (including the conditions imposed by the ACCC), the Tribunal must decide for itself whether authorisation should be granted and whether conditions should be imposed.
For the reasons that follow, the Tribunal has determined that the ACCC determination should be varied. The Tribunal has determined that the NET Code (in the form set out in Annexure A) should be authorised subject to the conditions set out in Annexure B to this determination. In summary, the conditions require the deletion or variation of the unregulated consumer credit provisions of the NET Code, and certain other provisions discussed below, that the Tribunal considers will have anti-competitive effects and result in significant public detriments.
2. BACKGROUND TO THE AUTHORISATION
The residential solar panel sector
Background information concerning the residential solar PV (photovoltaic) sector was contained in a report published in December 2016 by KPMG for Energy Consumers Australia.
The report stated that, over the preceding decade, there had been a rapid increase in the number of households installing solar panel systems on their rooftop and that, as at the date of the report, approximately 1.5 million households had solar panels and were generating their own electricity. Since 2011, the rate of installations had lessened, however the average size of installations had grown over time as the cost of solar panels had decreased. In 2010, the average system size for new installations was 1.5 kW. By the end of 2015, the average system size for new residential installations had reached approximately 5.5 kW. Across Australia, over 5,000 MW of rooftop solar PV generation capacity had been installed which represented approximately 12% of total generation capacity in the National Electricity Market.
By way of update to the data presented in the KPMG report, we note that recent data published by the Clean Energy Regulator shows that installations of small scale solar PV installations have continued to grow up to the present time. In the 2019 calendar year, there were approximately 280,000 installation of small-scale solar panel systems. As of 31 March 2020, there were over 2.3 million small-scale solar PV installations in Australia. Data published by the Australian Photovoltaic Institute, sourced from the Clean Energy Regulator, also shows that the trend toward larger systems (referred to in the KPMG report) has continued in the last few years, particularly in the range of 6.5 - 9.5 kW systems.
The KPMG report described the financial value from a solar panel system for consumers and why it is difficult to calculate. The report explained that the value of solar PV is often marketed, and understood by consumers, in terms of the payback period, being the period it takes for financial returns from the system to pay off the initial costs of installation. The length of the payback period will depend on the upfront installation costs of the system, including any required grid connection and metering upgrade costs, relative to:
(a)the Commonwealth Government’s subsidy under the Small Renewable Energy Scheme, which effectively provides an upfront reduction in the cost of installation;
(b)feed-in-tariffs for energy generated by the solar panel system and exported to the network; and
(c)savings in a consumer’s electricity bill from energy generated by the solar panel system and used by the household (in place of energy drawn from the grid).
The Commonwealth’s Small Renewable Energy Scheme provides a financial incentive for individuals and businesses to install small-scale renewable energy systems such as rooftop solar, solar water heaters and heat pumps. This occurs in the form of small-scale technology certificates which are issued up front for a system’s expected power generation (based on its installation date and geographical location). The price of certificates changes according to market conditions. The total level of subsidy depends on several factors, including the location and size of the solar panel system and the price of certificates at the time the system is installed.
Feed-in-tariffs are a payment to a customer for generating electricity, paid per kWh. The type and level of feed-in-tariff differs between jurisdictions and has reduced over time. As a consequence, different feed-in-tariffs now apply to different customers, depending on when they installed the solar panel system. Previously, and to encourage the adoption of solar installations, jurisdictional governments offered premium feed-in-tariff rates which were significantly higher than the wholesale cost of electricity. These rates were highly effective in fostering uptake of solar PV installations. Most jurisdictional governments closed eligibility for new entrants from 2011 onwards. Since then, new installations have been able to qualify for schemes available from their electricity retailer. Generally, these schemes provide a tariff payment that is equivalent to the avoided cost of supply due to the operation of a rooftop solar generator and are significantly lower than the previous government scheme rates. As part of a package of energy market reforms endorsed by the Council of Australian Governments (COAG) on 7 December 2012, COAG agreed to a revised set of National Principles for Feed‑in Tariff Arrangements.
The KPMG report expressed the view that the first two sources of return from the solar panel system (the Commonwealth’s Small Renewable Energy Scheme and feed-in-tariffs) are relatively certain and straightforward to predict for suppliers, but that savings in electricity bills will likely be the biggest component of the financial value for consumers and are more difficult to estimate. The value of these savings is equal to the net reduction in energy consumed at the household multiplied by the applicable volume based tariff for electricity payable by the consumer. The calculation will depend upon the configuration of the solar PV installation in terms of size and location (as this determines energy generated and the time of generation), the level and structure of the consumer’s retail tariffs and the consumption patterns of the household and whether the household changes its consumption behaviour following the installation (the solar panel system only generates electricity during the day, whereas households continue to consume electricity outside daylight hours). For most households, the variable component of their retail tariff will be higher than the applicable net feed-in tariff and hence the household has an incentive to shift its consumption of energy from nighttime to daytime. As a result, the capability of a consumer to maximise the financial value from the investment in solar PV will depend on the alignment of consumption with the output of the solar PV which will vary by household characteristics.
A survey undertaken by UMR Research (in support of the analysis undertaken by KPMG) suggests that the majority of customers install solar panel systems to reduce their energy bills. A secondary reason is that customers are seeking greater energy independence (at a time of rising energy prices). Environmental concerns, while important, featured less strongly. The same survey indicated that the cost of installation appears to be the main barrier to consumers installing solar PV (approximately a third of customers surveyed that do not have solar PV consider it to be too expensive). Another third of customers surveyed were renting their home and cited this as the main barrier to installing solar PV. The UMR survey results also suggest that the majority of customers are unlikely to be undertaking their own financial assessment of the value of installing solar and the impact of different sized systems on their return. Rather, they are relying on information provided by the supplier.
The KPMG report expressed the following conclusions (relating to the experience of customers):
(a)Residential customers are generally satisfied with the performance of their system. However, many customers do not understand how their systems operate or how to get the most value from their systems. There is also evidence that some customers are being sold systems that are not appropriately sized for them.
(b)Barriers to acquiring solar panel systems remain to certain customers, including the majority of apartment dwellers and renters, and those that cannot afford the upfront costs of installation.
(c)Customers need access to information in order to make informed decisions. Battery storage adds an additional dimension to an already complex energy market and requires the customer to make decisions on multiple variables relating to the use of batteries and how to integrate batteries with a solar PV installation.
The development of the NET Code
In late 2013, the COAG Energy Council (a forum for the energy ministers of the Commonwealth, States and Territories to work together in the pursuit of national energy reforms) resolved to establish a national energy consumer advocacy body. On 30 January 2015, Energy Consumers Australia was established by the COAG Energy Council for that purpose, with a mandate to act as a national energy consumer advocacy body for residential and small business energy consumers.
In April 2016, Energy Consumers Australia engaged KPMG to analyse outcomes for residential solar PV customers and the impacts of solar PV on the broader energy market, as well as future developments linked to battery storage. KPMG presented its report in December 2016, which is referred to above.
By letter dated 16 August 2017, the then Chair of the COAG Energy Council, the Hon Josh Frydenberg MP, wrote to Energy Consumers Australia in relation to consumer protections for energy products and services. Amongst other things, the letter requested Energy Consumers Australia to develop a range of consumer information products on consumer rights and protections for “behind-the-meter” products and services and also requested Energy Consumers Australia to work with industry to cooperatively develop a single, industry wide Code of Conduct for all behind-the-meter electricity supply services and products. The term “behind-the-meter” describes energy related products and services that are located on the consumer’s side of the energy meter installed at their premises (and which are not the responsibility of the relevant energy retailer or distributor). The letter requested that the Code address:
(a)information provision;
(b)dispute resolution mechanisms;
(c)ensuring products are fit-for-purpose; and
(d)customers in financial difficulty.
A “behind-the-meter” working group (BTMWG) was established in October 2017, in order to give effect to the request of the COAG Energy Council. The members of the BTMWG were:
(a)Energy Consumers Australia, as the national energy consumer advocacy body for residential and small business energy consumers;
(b)Clean Energy Council, as the peak body for the clean energy industry in Australia representing businesses operating in, or supporting, the development of renewable energy (including solar, wind, hydro, bioenergy, geothermal and marine);
(c)Australian Energy Council, as the industry body representing 23 businesses operating in the wholesale and retail energy markets;
(d)Smart Energy Council, as the peak body for the solar, storage and smart energy industry in Australia;
(e)Energy Networks Australia, as the industry body representing Australia’s electricity transmission and distribution and gas distribution networks;
(f)Renew, a not-for-profit association that advocates for sustainable living practices;
(g)CALC, a not-for-profit organisation which advocates for a fair marketplace for the benefit of consumers;
(h)the Public Interest Advocacy Centre, being an association which tackles difficult social problems that impact on the lives of Australians;
(i)Energy Queensland, which is responsible for the Queensland government’s electricity networks and retail businesses; and
(j)the national electricity generator and retailer, AGL.
A draft code of conduct was released for stakeholder consultation in late November 2018, with a request for feedback by 6 February 2019. Written submissions were received from many interested parties, addressing a range of issues, including the terms on which BNPL finance should be available to consumers seeking to acquire NET products and unsolicited sales of NET products. The final version of the code of conduct approved by the BTMWG entirely prohibited the offering of BNPL finance in connection with the supply of NET products. The code stipulated that signatories could only offer deferred payment arrangements which were regulated under the NCCP Act and the National Credit Code and which were provided by credit providers licensed under the NCCP Act. The proposed code of conduct was submitted to the ACCC for authorisation in April 2019.
Regulated and unregulated consumer credit
A central issue in this review is whether the NET Code should permit signatories to offer unregulated consumer credit, particularly BNPL finance, in connection with the supply of NET products and, if so, in what circumstances.
Various forms of credit activity are regulated by the NCCP Act and the National Credit Code (which, by s 3 of the NCCP Act, has effect as a law of the Commonwealth). Credit activity under those laws is defined to include:
(a)being a credit provider under a credit contract (which is a contract under which credit, to which the National Credit Code applies, is or may be provided);
(b)carrying on a business of providing credit to which the National Credit Code applies; or
(c)performing the obligations, or exercising the rights, of a credit provider in relation to a credit contract or proposed credit contract (whether doing so as the credit provider or on behalf of the credit provider).
Relevantly, credit to which the National Credit Code applies is credit that satisfies each of the following conditions:
(a)the debtor is a natural person (or a strata corporation);
(b)the credit is provided or intended to be provided wholly or predominantly:
(i)for personal, domestic or household purposes; or
(ii)to purchase, renovate or improve residential property for investment purposes; or
(iii)to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes;
(c)a charge is or may be made for providing the credit; and
(d)the credit provider provides the credit in the course of a business of providing credit.
However, by s 6(5) of the National Credit Code, the Code does not apply to the provision of credit under a continuing credit contract if the only charge that is or may be made for providing the credit is a periodic or other fixed charge that does not vary according to the amount of credit provided and the charge does not exceed the maximum charge prescribed by regulations. Regulation 51 of the National Consumer Credit Protection Regulations 2010 (NCCP Regulations) stipulates that the maximum charge is:
(a)for the period of 12 months commencing when the debtor enters into the continuing credit contract - $200; and
(b)for any subsequent period of 12 months during which the continuing credit contract is in effect - $125.
BNPL providers have structured their business models to come within s 6(5) of the National Credit Code with the result that the consumer credit they offer is not credit to which the National Credit Code applies and is not regulated by the NCCP Act. The common feature of BNPL finance is that the credit providers do not charge interest to customers but instead charge customers various fixed fees (typically a loan establishment fee, a monthly fee and a late payment fee). Instead of charging interest to the borrower, BNPL credit providers charge merchants a fee equal to a percentage of the amount of the purchase being financed. The size of the merchant fee (as a percentage) depends on factors such as the volume of BNPL arrangements used by the merchant, the risk profile of the merchants and the types of goods and services offered by the merchant.
Obligations under the NCCP Act
The NCCP Act and the National Credit Code impose various regulatory obligations on persons who provide credit to which the National Credit Code applies (which we will refer to as regulated consumer credit). The following regulatory obligations are relevant to the issues raised in this review.
First, by s 29 of the NCCP Act, a person must not engage in a regulated credit activity unless they hold an Australian credit licence under the Act or they are an authorised credit representative of a person who holds an Australian credit licence.
Second, s 47 of the NCCP Act imposes various conduct obligations on Australian credit licensees, including that the licensee must:
(a)do all things necessary to ensure that the credit activities authorised by the licence are engaged in efficiently, honestly and fairly;
(b)maintain the competence to engage in the credit activities authorised by the licence;
(c)have an internal dispute resolution procedure that (i) complies with standards and requirements made or approved by ASIC in accordance with the regulations and (ii) covers disputes in relation to the credit activities engaged in by the licensee or its representatives; and
(d)be a member of the external dispute resolution scheme operated by the Australian Financial Complaints Authority (AFCA) (for which an authorisation under Part 7.10A of the Corporations Act is in force).
Third, by s 64, an Australian credit licensee may authorise a person to be their credit representative by written notice. By s 65, a credit representative that is a body corporate may authorise a natural person to be their representative provided the Australian credit licensee consents. The consent may be given in respect of an identified person or class of persons. By s 71, a person who authorises a credit representative under ss 64 or 65 must lodge a written notice with ASIC. A list of authorised credit representatives taken from ASIC’s register on 12 June 2020 showed that there are more than 38,000 such representatives. Credit representatives must also be members of the AFCA scheme.
Fourth, ss 128 to 133 of the NCCP Act (within Divisions 3 of Part 3-2) require providers of regulated consumer credit to assess whether the credit contract will be unsuitable for the borrower before entering into the credit contract or increasing the credit limit, commonly referred to as responsible lending obligations. In particular, s 130 requires the credit provider:
(a)to make reasonable inquiries about the consumer’s requirements and objectives in relation to the credit contract;
(b)to make reasonable inquiries about the consumer’s financial situation; and
(c)to take reasonable steps to verify the consumer’s financial situation.
Section 131(2) provides that a credit contract will be unsuitable for the consumer if it is likely that, amongst other things, the consumer will be unable to comply with the consumer’s financial obligations under the contract, or could only comply with substantial hardship.
ASIC has published Regulatory Guide 209 concerning the responsible lending obligations under the NCCP Act. The Guide indicates that reasonably detailed information concerning the customer’s financial position is required including the following:
(a)In relation to income, the finance provider should seek the amount, frequency and source of income and changes that are reasonably foreseeable. The finance provider will need information to determine whether the income received in the last pay period is consistent and likely to remain at that level for the term of the credit product being considered. If the consumer has casual or seasonal employment, the finance provider will need information about the variations in hours and pay that may be expected.
(b)In relation to outgoings, the finance provider should seek information about the customer’s current outgoings, and reasonably foreseeable changes to those outgoings. If there is a shortfall between income and outgoings (including the new financial obligations under the credit to be provided), the provider should assess whether the customer is likely to be able and willing to reduce some expenditure to meet the new financial obligations. In that regard, the finance provider will need to consider categories of outgoings that a customer is less likely to be able to reduce or eliminate.
(c)In relation to assets, the Guide observes that the general position is that customers should be able to meet the financial obligations from income rather than equity in an asset. Nevertheless, assets may contribute to both the customer’s income and their expenditure. Assets may also, in some cases, be available to be sold by the consumer to enable them to meet financial obligations under a credit product if needed. Therefore the finance provider will require information about such assets and the expected use of the asset during the period of credit.
Fifth, Division 3 of Part 4 of the National Credit Code imposes obligations on the credit provider in the event that the borrower notifies the credit provider that the borrower is unable to meet his or her obligations under the credit contract (which is referred to as a hardship notice). The credit provider may seek further information from the borrower and, within a specified period, notify the borrower whether the credit provider agrees to change the credit contract. If the credit provider does not change the credit contract as a result of a hardship notice by the borrower, the borrower may apply to the court to change the terms of the credit contract. The National Credit Code gives the court various powers to vary the credit contract in that event.
In certain circumstances, a supplier of goods or services who also engages in a credit activity (typically, offering a customer a credit product to which the National Credit Code applies in connection with the sale of goods or services) is exempted from the requirement in s 29 to hold an Australian credit licence or be an authorised representative of a licensee: see s 110(a) of the NCCP Act and regulation 23(3) of the NCCP Regulations. However, the exemption does not apply if the person supplies goods or services to the consumer as a result of unsolicited contact with the consumer: see regulation 23(4). Accordingly, if a supplier wishes to offer regulated consumer credit in connection with a sale of goods or services that results from unsolicited contact with the customer, the supplier must either be the holder of an Australian credit licence or be an authorised representative of the licensed credit provider under ss 64 and 65 of the NCCP Act.
Obligations under the ASIC Act
While BNPL finance is not regulated by the NCCP Act, it is nevertheless subject to regulation under various other laws, including particularly the ASIC Act. BNPL finance is a “credit facility” and therefore a financial product for the purposes of the ASIC Act: see s 12BAA(7)(k).
Under the ASIC Act, a provider of BNPL finance must not:
(a)engage in conduct which is unconscionable (ss 12CA and 12CB);
(b)engage in conduct which is misleading or deceptive, likely to mislead or deceive or liable to mislead the public (ss 12DA and 12DF);
(c)make false or misleading representations (s 12DB);
(d)engage in bait advertising (s 12DG);
(e)engage in referral selling (s 12DH); or
(f)engage in harassment or coercion (s 12DJ).
The ASIC Act provides for a range of remedies for contraventions of the above prohibitions, including pecuniary penalties, damages and compensatory orders.
Additionally, any term of a standard form contract for the provision of BNPL finance to consumers or small business which is unfair is void (s 12BF). A term of a contract is unfair if:
(a)it would cause a significant imbalance in the parties’ rights and obligations arising under the contract;
(b)it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
(c)it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
Obligations under the Corporations Act
BNPL finance is also subject to regulation under various parts of the Corporations Act. The parties referred in particular to the provisions of the Corporations Act that were recently enacted by the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 (Cth). That Act contained two relevant amendments.
The first commencing amendment is the insertion of a new Part 6-7A into the NCCP Act and a new Part 7.9A into the Corporations Act (titled “Product intervention orders”) in substantially the same form. The provisions in the Corporations Act commenced in April 2019 and apply to BNPL products. Under those provisions, ASIC is empowered to make a product intervention order in respect of a financial product issued or sold to retail clients if it is satisfied that the issue or sale of the product has resulted in, or will or is likely to result in, significant detriment to retail clients. The product intervention order is an order that a specified person must not engage in specified conduct in relation to the product, either entirely or except in accordance with conditions specified in the order. A product intervention order may also be issued in respect of a class of financial products. A person commits an offence, and is also subject to civil liability (including for damages), if they fail to comply with a product intervention order.
The second commencing amendment is the insertion of a new Part 7.8A into the Corporations Act (titled “Design and distribution requirements relating to financial products for retail clients”). The provisions will commence on 5 October 2021 and will apply to BNPL products. The provisions will require BNPL finance providers to issue (and make public) “target market determinations” which describe the class of retail clients that comprises the target market for the product and specify any conditions and restrictions on retail product distribution in relation to the product. A target market determination must be such that it would be reasonable to conclude that if the product were to be issued or sold:
(a)to a retail client in accordance with the distribution conditions, it would be likely that the retail client is in the target market; and
(b)to a retail client in the target market, it would likely be consistent with the likely objectives, financial situation and needs of the retail client.
A person who makes a target market determination for a financial product will be obligated to take reasonable steps to ensure that retail product distribution is consistent with the determination. ASIC will be given various powers to enforce the design and distribution obligations including the power to issue stop orders. There are also civil sanctions for non‑compliance including the recovery of damages or compensation.
ASIC Report 600
In November 2018, ASIC released Report 600 titled Review of buy now pay later arrangements. The report described BNPL arrangements as typically involving three contracts: a contract between the consumer and the BNPL provider (for repayment of the purchase over time); a contract between the consumer and the merchant (for the sale of goods or services); and a contract between the BNPL provider and the merchant (for the payment of the sale price less a merchant fee). ASIC observed that these arrangements can be cheaper for consumers than some other types of credit because consumers are generally not charged interest and there are limits on the fees that BNPL providers can charge (to remain within the exemption from the NCCP Act and the National Credit Code).
In its review, ASIC examined six BNPL products:
(a)Afterpay provided by Afterpay Pty Ltd;
(b)zipPay provided by zipMoney Payments Pty Ltd;
(c)Certegy Ezi-Pay (which has now become humm) provided by Flexigroup’s subsidiary Certegy Ezi-Pay Pty Ltd;
(d)Oxipay provided by Oxipay Pty Ltd;
(e)BrightePay provided by Brighte; and
(f)Openpay provided by Openpay Pty Ltd.
ASIC commissioned independent consumer research which included a qualitative online discussion board and a quantitative survey of 600 randomly selected consumers who had used a buy now pay later arrangement within 12 months of completing the survey. ASIC also consulted a range of stakeholders including other regulatory agencies, consumer advocates, the two ASIC-approved external dispute resolution schemes at the time and industry associations. ASIC also reviewed information provided by each BNPL provider, which included policies and procedures, responses to a qualitative survey and over 650 aggregated fields of data from each provider.
The executive summary to the report contained the following findings made by ASIC:
1In January 2018, ASIC commenced a review of ‘buy now pay later’ arrangements. These arrangements allow consumers to buy and receive goods and services immediately but pay for that purchase over time.
2 The market for these arrangements is diverse, evolving, and growing rapidly. The number of consumers who used at least one buy now pay later arrangement has increased about five-fold from 400,000 consumers during the 2015–16 financial year to over 2 million consumers during the 2017–18 financial year. This represents about 10% of the adult population in Australia.
3 Many buy now pay later users appear to be regular users of these arrangements. More than four in five consumers (86%) who had used a buy now pay later arrangement within the last 12 months plan to do so again. Most users also believe that these arrangements allow them to buy more expensive items, spend more than they normally would, or make more spontaneous purchases.
4 Buy now pay later arrangements can create some risks for consumers if they take on debt that they may have difficulty paying back. To make a scheduled repayment on a buy now pay later arrangement, some consumers delayed paying bills, became overdrawn, or borrowed money from family, friends or another loan provider.
5 Many consumers who have recently used a buy now pay later arrangement are also younger consumers and students who describe themselves as part-time employed or unemployed.
6 Buy now pay later providers take some steps to help consumers stay in control and make informed decisions about their purchases and repayments. For example, 75% of users keep track of their repayment obligations through notifications, online accounts and mobile applications from their buy now pay later provider. While we identified instances where providers could have done more, each provider demonstrated a readiness to work with ASIC by improving their practices in response to our recommendations.
7 The consumer protections under the National Consumer Credit Protection Act 2009 (National Credit Act) do not apply to buy now pay later arrangements. This means that buy now pay later providers do not need to hold an Australian credit licence (credit licence) to provide these arrangements, nor comply with the responsible lending obligations.
8 Only one out of six providers in our review examined the income and existing debts held by consumers before providing their services. We also received reports of instances where consumers were allowed to use a buy now pay later arrangement despite having limited or no income and substantial existing debt.
9 Currently, ASIC has limited jurisdiction to regulate conduct and address lending risks to consumers when they use a buy now pay later arrangement.
10 We consider that ASIC’s proposed product intervention power should apply to all credit facilities regulated under the Australian Securities and Investments Commission Act 2001 (ASIC Act), which includes buy now pay later arrangements. This would allow us to act quickly and effectively to address the causes of problems if we identify a significant detriment to consumers that cannot be resolved through other action.
11In using the product intervention power, we would look for interventions that represent the most targeted and appropriate regulatory solutions to address identified consumer detriment.
Two of the issues that arise in this review are the prevalence and significance of the practice of merchant surcharging and the extent to which BNPL products are governed by consumer protection laws.
Merchant surcharging occurs when the merchant increases the price of the products sold to the consumer with BNPL finance to recover part or all of the merchant fee payable to the credit provider. ASIC summarised its findings on this practice as follows:
Finding 3: Some buy now pay later arrangements result in the price of goods being inflated
34 Each provider in our review contractually prevents merchants from charging consumers higher prices for using a buy now pay later arrangement.
35 For lower priced goods (typically under $1,000–2,000), and for goods sold at merchants that do not negotiate prices (such as online stores or department stores), consumers do not currently pay more for using a buy now pay later arrangement compared to other payment methods such as cash, a debit card or credit card. Given existing surcharges for some credit card transactions, merchants may in the future seek to introduce surcharges for buy now pay later arrangements. The implications of this would need to be considered.
36 However, we have received anecdotal evidence that some merchants may have charged consumers significantly higher prices for using a buy now pay later arrangement, including for:
(a) higher-value purchases (over $2,000);
(b) where the price of goods is less transparent and ‘negotiable’ (e.g. solar power products); or
(c) where consumers are acquiring services.
37 These higher prices can be misleading to consumers if they are not disclosed, because they can obscure the actual cost of using a buy now pay later arrangement. This can make it difficult for consumers to make an informed decision about the costs of the arrangement.
38 ASIC is considering the legal position of scenarios where a merchant inflates the cost of the underlying goods if a consumer uses a buy now pay later arrangement. We have taken action against credit providers for attempting to avoid the National Credit Code by creating artificial business models and for engaging in credit activities without a licence.
With regard to consumer protection laws, the report noted that the NCCP Act does not apply to BNPL products, but the ASIC Act does apply as the products are credit facilities within the meaning of the ASIC Act. Accordingly, ASIC has responsibilities for the products in its administration of the prohibitions against misleading and deceptive conduct and unconscionable conduct in the ASIC Act. The report stated that ASIC had not yet formed a view whether BNPL providers should be required to comply with the NCCP Act. ASIC stated that its ongoing monitoring of the industry will help ASIC to assess whether it should advise the Government to consider further law reform. As a first step, though, ASIC recommended that the then proposed product intervention powers to be given to ASIC should be extended to all credit facilities regulated under the ASIC Act, which would include BNPL facilities.
Subsequent to ASIC’s Report 600, the product intervention powers were enacted by the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 (Cth) which are described above.
As discussed further below, since mid-2019 ASIC has been working on a follow up to Report 600 which is intended to be a public report.
AFIA Code of Practice for BNPL providers
A code of practice for BNPL finance is currently being developed by the Australian Finance Industry Association (AFIA) and its BNPL members: Flexigroup, Afterpay, Brighte, Klarna, Latitude, Openpay, Payright and ZipMoney. A draft of the code of practice was circulated by AFIA in or around February 2020. By media release dated 18 May 2020, AFIA referred to the consultation process being undertaken in respect of the code and feedback received and stated that it aimed to finalise the code with a view to launching it on 1 January 2021.
The code of practice is intended to be a voluntary code, binding on BNPL providers who become “members”. The stated objectives of the draft code of practice are to assist BNPL providers to “(a) Promote a customer-centric approach to the design, marketing and distribution of a Buy Now Pay Later Product or Service; (b) Promote high industry standards of service for customers and build best practices across the BNPL Industry; and (c) Support compliance with legal and industry obligations”. The draft code states that its provisions are contractually enforceable by BNPL customers.
The commitments contained in the draft code include the following:
(a)to ensure that BNPL products are suitable for the customer, taking into account customers’ characteristics based on the common aspects of their objectives, financial situation and needs;
(b)to always act fairly and honestly, be ethical and treat the customer reasonably in all dealings;
(c)BNPL product terms and conditions will be fair, clear and transparent and written in plain language and BNPL providers will provide clear and prominent information about scheduled repayments obligations and the fees charged;
(d)in the event of late payment, the provider will contact the customer before charging late fees;
(e)not to provide additional products or increase the amount borrowed if the customer is in arrears;
(f)to have a complaints policy and handle complaints promptly and fairly;
(g)provide customers with the opportunity to take complaints to AFCA and abide by AFCA’s rules; and
(h)offer financial hardship assistance.
3. OVERVIEW OF THE NET CODE
The overview that follows is based on the form of the NET Code set out in Annexure A to this determination, which is the final form of the Code submitted by the authorisation applicants to the ACCC for authorisation. It does not include changes required by the ACCC conditions of authorisation. This is the version formally relied on by the authorisation applicants before the Tribunal although, as discussed below, the authorisation applicants invited the Tribunal to impose conditions of authorisation requiring the amendment of various provisions.
The introduction to the NET Code states that its intention is to raise standards of consumer protection in the sector, to strengthen consumer confidence in NET products and to encourage innovation and the development of choice for consumers. Providers who are accepted by the Administrator as signatories to the Code are bound to comply with the Code.
NET is defined in the Code as follows:
New Energy Tech are:
a) small-scale (in-home or small business) products and systems that generate, store or trade energy away from Australia’s main transmission and distribution Energy Networks or as distributed energy resources connected to an Energy Network
b) services that support or are closely related to those products and systems
c) products, systems and services that monitor or manage a Customer’s usage of energy whether on or off an Energy Network
d) any other product, system and service that the Administrator is satisfied is appropriately within this Code.
The term does not, however, include simple, low cost or off-the-shelf New Energy Tech that are within a class exemption made by the Administrator in accordance with paragraph 17 of the Annexure – Code Administration.
Examples of New Energy Tech are:
e) distributed energy resources owned by or leased to the Customer that are connected to an Energy Network for supplementary supply such as solar photovoltaic systems, wind turbines, hydro and bioenergy generators
f) a microgrid that may be connected or fully isolated from the Energy Network
g) a power system for a single Customer, whether or not the Customer is also connected to an Energy Network
h) energy management products, systems and services supplied to a Customer including home energy management systems and services, battery and other storage products, systems and services
i) programs aimed at stabilising the supply of energy including by paying Customers an incentive to reduce their usage during critical peak periods or by shutting down or restricting the power consumption of Customer appliances during critical peak periods
j) a Power Purchase Agreement
k) person to person energy trading systems and services
l) electric vehicle charging services
m) suppliers of repair, maintenance and removal services for New Energy Tech products and systems.
These examples are not intended to limit the scope of the definition. Rather the term has been defined to accommodate new products and services as they enter the Australian market where the nature, complexity and cost is such that the Code protections are appropriate.
The Code is divided into four sections:
(a)Part A provides an overview of the key commitments made to customers;
(b)Part B sets out required practices in detail;
(c)Part C defines key terms; and
(d)the Annexure sets out how the Code is administered, monitored and enforced by the Administrator and the Code Monitoring and Compliance Panel.
Part A
The key commitments in Part A of the Code are stated at a high level of generality. Para 1 states that the key commitments are to:
(a)provide the customer with clear, accurate and relevant information to help the customer make informed choices;
(b)encourage the customer to be aware of their rights under the law and the Code;
(c)ensure that the provider’s sales practices are responsible;
(d)ensure that products, systems, services and documentation provided under the Code are suitable and fit for purpose;
(e)support staff training and work processes that ensure that the provider complies with the law and the Code; and
(f)ensure that the provider will be responsive to the customer’s needs and takes prompt, appropriate action if the customer makes a complaint.
Part B
The commitments in Part B of the Code are more specific. They are structured around the steps in the “customer journey”, being advertising and promotion; direct marketing and sales; fitness for purpose; quoting; contracts; payment and finance; delivery; installation and safety; activation; user information; customer service; warranty; and complaints and compliance.
Advertising and marketing
Paras 2 and 3 of the Code contain a general commitment by providers that their advertisements and other promotional material will not include any false or misleading claims about the provider or their NET product, as well as specific commitments not to make false or misleading claims about different aspects of their products or services. Generally, the obligations do not go beyond the obligations imposed by the Australian Consumer Law in Part 2-1 (misleading and deceptive conduct) and Division 1 of Part 3-1 (false or misleading representations). There is one significant exception, which is one of the central issues raised in this review. It is para 3(d) which states that advertisements and promotional material will make no unsolicited offers of payment arrangements not regulated by the NCCP Act.
Direct marketing and sales
Paras 4, 5 and 6 of the Code address direct marketing, including unsolicited contact whether by telephone or in person. The commitments reflect aspects of the obligation imposed by the Australian Consumer Law in respect of unsolicited sales in Division 2 of Part 3-2. However, the commitments go beyond those imposed by the law and include:
(a)a commitment to provide the customer with the “Administrator approved Consumer Information Product that explains the consumer protection framework that applies under legislation and this Code;
(b)a commitment to avoid high-pressure sales tactics and seeking to sell a product to a person who is unlikely to understand the product information or the contract; and
(c)a commitment to take extra care if the provider becomes aware that the customer may be facing vulnerable circumstances (e.g. illness, impairment, a victim of abuse or financial stress).
Fit for purpose inquiry
Paras 7 and 8 of the Code contain commitments directed to the fitness for purpose of the products offered to customers. The commitments include to make enquiries about the customer’s specific circumstances, needs and expectations and ensuring that any offer of products is fit for purpose in light of the circumstances, needs and expectations described by the customer. The commitment supplements the consumer guarantee in ss 55 and 61 of the Australian Consumer Law (that goods and services are fit for any disclosed purpose) by requiring the supplier to make enquiries about the customer’s purpose (circumstances, needs and expectations) in acquiring the goods or services.
Quoting
Paras 9 to 18 of the Code contain commitments about quoting, divided into four sections: general requirements; financial disclosure; design; and connections. The commitments extend beyond the obligations at law and commit signatories to specific commercial practices.
The general requirements in para 9 require signatories to provide customers with information about the supplier, the products to be supplied; performance estimates, the timeframe for supply, business terms, guarantees and warranties and, if applicable, cooling-off and termination rights under the Australian Consumer Law.
The financial disclosure requirements in paras 10 to 16 require signatories to disclose the amount of any deposit, the total price payable, circumstances that may result in additional charges, any periodic charges that will apply. Significantly, para 15 requires that, if the provider makes a claim that the customer is likely to achieve a favourable return on their investment, the provider will include in the quote a return on investment calculation that is based on reasonable assumptions and where available from reputable sources and will set out the assumptions made.
The design requirements in para 17 require signatories, if the quote includes products that require custom configuration or specification and/or physical installation, to include as part of the quote a site-specific installation design or plan.
The connection requirements in para 18 require signatories, if the quote is for a product that requires approval from an energy supplier for connection to the energy network and/or reconfiguration of the meter, an offer to arrange this and an explanation of the steps that need to be taken to obtain approval.
Contracts
Paras 19 to 23 of the Code contain commitments about the form and content of contracts. The commitments extend beyond the obligations at law, although many of the commitments are stated at a high level of generality. For example, para 19 requires signatories to provide the customer with a written contract that is clear, uses plain language and is in legible print. More significantly, para 20 requires signatories to include in their contract:
(a)an undertaking by the provider to comply with the Code (thus making the terms of the Code part of the customer contract); and
(b)information about how to make a complaint and the complaint resolution process including the customer’s right to take a complaint to the Administrator or a government regulator.
Payment and finance
Paras 24 to 30 of the Code contain commitments about payment and finance. The primary obligation is contained in para 25, which is central to the issues raised in this review. It is an obligation that extends beyond obligations imposed by the law. It applies if the provider offers NET products to a residential customer with a deferred payment arrangement that includes an interest component, additional fees or an increased price. In that event, para 25 imposes three obligations on the provider in relation to the finance arrangement.
The first obligation, in para 25(a), concerns the credit provider. The paragraph stipulates that either the credit provider must be licensed under the NCCP Act and the deferred payment arrangement must be regulated by the NCCP Act and the National Credit Code or, if that is not the case, the credit provider must be licensed under the NCCP Act and the deferred payment arrangement must be approved by the Administrator in one of two ways:
(a)the first way is that the Administrator has determined that the credit provider is a signatory to an industry code of conduct that imposes obligations on the credit provider equivalent to those imposed by the NCCP Act and the National Credit Code in respect of responsible lending, financial hardship and dispute resolution; or
(b)the second way, which is an interim measure until 1 January 2021, is that the Administrator has approved the credit provider’s deferred payment contract in accordance with procedures set out in the Annexure to the Code.
The second obligation, in para 25(b), is that the term of the deferred payment contract must be no longer than the expected life of the product or system supplied to the customer.
The third obligation, in para 25(c), is that the customer receives clear and accurate information concerning the credit provider and the finance arrangement including fees and charges. Significantly, para 25(c)(iii) requires that the customer must be told the proposed total cost under the deferred payment arrangement compared with the cost of that same NET product, system or service if the customer were to purchase it outright on that day.
Delivery, installation and safety
Paras 31 and 32 of the Code contain commitments about delivery, installation and safety. Para 31 requires signatories to deliver and install products within the timeframe specified in the contract. Para 32 requires signatories to install in accordance with all applicable safety standards, manufacturer’s specifications, relevant Australian Standards, energy network standards, any binding guidance issued by the Administrator and good industry practice, using an installer that is trained, competent and (where applicable) holds any required qualification or certification to undertake the work.
Activation
Paras 33 to 36 of the Code contain commitments about activation of the NET product. Para 33 contains commitments if the provider agrees to obtain energy network connection on behalf of the customer, and para 34 contains commitments if the customer elects to take responsibility for connection. In both cases, the provider commits to a full refund if connection is not achieved.
Operating information
Para 37 of the Code contains commitments about operating information. It requires signatories to provide information about safe and effective operation, maintenance and optimisation of the product supplied and to advise how to use the product and/or assess the benefits of the product.
Performance
Paras 38 to 40 of the Code contain commitments about performance. The obligations largely reflect obligations at law, being commitments to comply with contractual obligations and certain of the consumer guarantees in Division 1 of Part 3-2 of the Australian Consumer Law, including to meet the customer’s needs as explained to the provider (which is equivalent to the fitness for purpose guarantee in ss 55 and 61) and to provide services with all due care and skill (which is equivalent to the due care and skill guarantee in s 60).
Move from premises
Para 41 contains a commitment to allow a customer, who sells their property, to assign an ongoing contract to the purchaser.
Warranty claim
Paras 42 to 44 contain commitments about warranty claims. The commitments extend beyond obligations at law, but are stated at a high level of generality. They include commitments to respond promptly to claims.
Termination of contract
The third aspect of the NET Code that requires consideration are provisions which have uncertain effect but could be used to restrict supply and consumer choice.
During the hearing, the Tribunal raised concerns with the parties about provisions of the Code that empower the Administrator to stipulate mandatory standards with which NET signatories must comply. In that regard, para 61 provides that signatories must comply with the Code and any mandatory standards published by the Administrator on the Code website. Paras A15 and A16 empowers the Administrator to develop supplementary materials “to assist Signatories to meet the expectations of the Code” and these materials may include “mandatory and binding standards which must be followed where they apply”. Para A17 requires the Administrator to consult with stakeholders for a period not less than three months when developing any such mandatory standards. Para A18 empowers the Administrator to refer the proposed standard to the Code Monitoring and Compliance Panel for decision where substantive disagreement emerges and requires such a referral where a signatory makes an application. The Memorandum Of Understanding between the members of the BTMWG in relation to the Governance, Accountability and Administration of the Code sets out the composition of the Panel, comprising between three and seven members, at least two of whom must be industry representatives and at least one of whom must be a consumer representative.
The origin of the provisions in relation to mandatory standards lies in the design of the NET Code as technology neutral. It was, however, contemplated that, in due course, mandatory standards could be developed within the Code framework to protect consumer interests. Mr Barnes gave evidence that it was the intention of the BTMWG that as each technology matured and appropriate minimum standards became known, they could be included in the Code framework as mandatory standards.
The Tribunal notes that a number of Australian Standards already apply to the design and installation of solar and battery systems. Clean Energy Council accredited installers are required to abide by these standards. Para 32 of the NET Code includes a commitment by merchants to undertake installations in accordance with all such standards.
Only the authorisation applicants made submissions in relation to paras 32, 61 and A15 to A18 of the NET Code. Their primary position was that these provisions do not require amendment. In support of that position, they submitted that there are checks and balances in the Code which should address the potential anti-competitive effect of these provisions. Specifically, the Administrator is required to undertake consultation in relation to proposed mandatory standards. Where disagreement emerges, the Administrator may refer the proposed standards to the Panel for review. A signatory may also require such a referral. The authorisation applicants submitted that if the Tribunal considered that the provisions of the Code relating to mandatory standards required amendment, an appropriate amendment would be to replace the reference to mandatory standards with recommended standards and, in para 61, replace the obligation to comply with mandatory standards with an obligation to have regard to any recommended standards.
The Tribunal is concerned about the open ended nature of the provisions in the Code relating to mandatory standards, the potential effect of which is uncertain, but which could be used to restrict supply and competition. An agreement between competitors to abide by agreed mandatory standards could be used to restrict innovation and competitive offers by solar merchants in the future. This could result in unknown public detriments arising in the future, making it difficult for the Tribunal to be satisfied that the overall balance of public benefits and detriments arising from the Code meets the test for authorisation.
While the NET Code contains provisions for consultation in relation to any such mandatory standards, the Tribunal considers that where it is in the mutual interest of signatory merchants to restrict competition through mandatory standards, there would not necessarily be any referral to the Panel, since this is only a requirement when a signatory applies for such a referral. Further, in the event that the Administrator chooses to refer a proposed standard to the Panel as a result of substantive disagreement by other stakeholders, such as consumers or rival merchants who may wish to become signatories to the Code, the majority of the Panel will comprise industry representatives whose interests may be aligned with those of the merchant signatories to restrict competitive and innovative offers.
To address the Tribunal’s concerns, the authorisation applicants initially proposed changing references to mandatory standards in the Code to references to recommended standards. However, when the Tribunal indicated that this would not necessarily address the Tribunal’s concerns, the authorisation applicants proposed that if the Tribunal did not accept their primary position and maintained its concern with these provisions, the relevant provisions should be removed from the Code.
The Tribunal continues to be concerned about the uncertain and potentially anti-competitive effect of the provisions relating to mandatory standards, and the uncertain extent of public detriment that may arise from them. Accordingly, the Tribunal considers that the Code should be amended to remove all references to mandatory standards.
11. SHOULD AUTHORISATION BE GRANTED?
The Tribunal must only grant authorisation if it is satisfied that the conduct would result, or be likely to result, in a benefit to the public and the benefit would outweigh the detriment to the public that would result, or be likely to result, from the conduct. While the satisfaction of the statutory condition does not oblige the Tribunal to grant authorisation, ordinarily satisfaction of the test would lead the Tribunal to authorise the conduct.
The Tribunal has weighed the overall public benefits of the consumer protection provisions of the Code against the public detriments that the Tribunal considers will arise from the provisions of the Code concerning unregulated consumer credit and mandatory standards. The Tribunal considers that the latter outweigh the former. In other words, the Tribunal is not satisfied that the Code, in its present form, would be likely to result in a net public benefit (in comparison to the future without the Code). Accordingly, the Tribunal is not willing to authorise the Code in the form in Annexure A to this determination.
However, with the amendments to the Code that have been described in the preceding sections of these reasons, the Tribunal would be satisfied that the Code would be likely to result in a net public benefit (in comparison to the future without the Code). Accordingly, the Tribunal is willing to grant authorisation subject to a condition that the Code is amended as described. The relevant condition, and the specific amendments required, are set out in Annexure B to this determination.
One further question remains. In granting authorisation of the NET Code, the ACCC imposed a number of conditions requiring the authorisation applicants to submit annual reports to the ACCC in respect of a range of actions and decisions taken under the Code. The authorisation applicants submitted that reporting conditions are unnecessary, given the independence of the Administrator and that it is unnecessary for the Tribunal to exercise its discretion to impose conditions on any grant of authorisation. That question is considered in the following section.
12. REPORTING OBLIGATIONS
In granting authorisation of the NET Code, the ACCC imposed a number of conditions requiring the authorisation applicants to submit annual reports to the ACCC in respect of a range of actions and decisions taken under the Code, including:
(a)the number of applicants admitted as signatories to the Code;
(b)the number of unsuccessful applications for admittance under the Code;
(c)the number of appeals against a decision regarding admittance, and the outcome of those appeals;
(d)the number of, and a description of, alleged breaches of the Code by signatories;
(e)the number and nature of alleged breaches and/or complaints made in relation to signatories broken down by the type of finance arrangement used by the customer;
(f)the outcome of complaints and alleged breaches of the Code by signatories, including:
(i)the number of suspensions and identities of suspended signatories;
(ii)the number of expulsions and identity of expelled signatories;
(iii)other remedial actions imposed; and
(iv)whether the complaint or alleged breach was considered by AFCA and the outcome of those considerations; and
(g)the number and identity of BNPL providers that have been assessed in relation to compliance with para 25 of the Code, broken down by:
(i)those assessed as meeting the requirements of para 25 of the Code; and
(ii)those assessed as not meeting the requirements of para 25 of the Code.
The authorisation applicants submitted that reporting conditions are unnecessary. No other party addressed the question of reporting conditions.
The statutory power to impose conditions on the grant of authorisation was discussed earlier in these reasons. While there is no express limit on the power, it is not “at large”. As observed by the Tribunal in Medicines Australia at [129]-[133], the power must be exercised by reference to considerations relevant to its exercise, which are defined by the subject matter, scope and purpose of the power to grant authorisations. Although the categories of conditions referred to in Medicines Australia should not be regarded as fixed or definitive, a reporting condition generally falls into the third category referred to in that decision: a condition without which the ACCC or Tribunal on review would be unwilling to exercise the discretion to grant authorisation.
It is possible to envisage a range of circumstances in which a reporting condition would constitute a lawful exercise of power. If the authorisation is subject to a condition that the authorisation is to cease if a particular event occurs, a further condition may be required to report the occurrence of that event. If the benefits from an authorisation of a code of conduct will be achieved through public awareness of actions taken pursuant to the code, a condition requiring an administrative body to report such actions publicly may be required in order to achieve the benefits. Under ss 91B and 91C of the CCA, the ACCC has power to revoke an authorisation, and a power to substitute a new authorisation in place of the revoked authorisation, if (amongst other things) there has been a material change in circumstances since the authorisation was granted. Accordingly, it is likely to be a lawful exercise of power to impose a reporting condition to enable the ACCC to receive information about the conduct the subject of the authorisation relevant to any exercise of power under ss 91B or 91C. In contrast, it is unlikely to be a lawful exercise of power to impose a condition requiring a party to an authorisation to report information to the ACCC simply for the purpose of enabling the ACCC to monitor an industry that the ACCC has an interest in.
In its determination, the ACCC concluded that there are mechanisms in place to ensure the effective administration and enforcement of the Code. The ACCC referred to the following:
(a)the Administrator is required to consider specific matters when assessing applications from those wishing to become a signatory to the Code;
(b)decisions made by the Administrator requiring a signatory to rectify a breach are reviewable by the Panel if the signatory requests such a review and matters of expulsion or suspension are to be referred by the Administrator to the Panel for decision; and
(c)the Panel is required to publish online an annual report about the Code’s operation, including information about each finding of breach and the remedial action or sanction imposed.
The ACCC observed that the Panel’s reporting requirements, in addition to the appeals mechanism, means that it is unlikely that the Administrator will be able to inappropriately refuse membership or impose improper sanctions on signatories. The ACCC also noted that the Code provides for three-yearly independent reviews of its governance framework, including by seeking the views of stakeholders and revising the Code in light of that review. The ACCC concluded that the Code’s administrative framework under the Memorandum of Understanding contains sufficient rules, checks and balances to help ensure that the Administrator and the Panel will be sufficiently qualified and will appropriately assess applications for membership, appeals against a rejection of membership, and the level of sanctions against signatories for non-compliance.
The Tribunal agrees with those observations and conclusions expressed by the ACCC. The Memorandum of Understanding provides for the establishment of the various bodies that will administer the Code, including the Administrator and the Panel. In respect of the Panel, the Memorandum of Understanding stipulates that the Panel will carry out the responsibilities set out in the Code assigned to it. Relevantly, para A28 of the Code provides as follows:
The Panel is responsible for:
a) overseeing the monitoring of compliance and enforcement of this Code by the Administrator
b) reviewing a proposed mandatory or safe-harbour standard or guideline referred to it by the Administrator under paragraph A18
c) reviewing a decision made by the Administrator requiring rectification of a breach (under paragraph A24), if the relevant Signatory requests a review
d) reviewing a decision made by the Administrator to refuse admittance or renewal as a Signatory if requested under Paragraph A6
e) deciding matters of suspension or expulsion referred under paragraph A26 to it by the Administrator
f) referring serious or systemic breaches of law to relevant regulators under paragraph A27
g) publishing on-line an annual report about the Code's operation. This must include reporting on Code compliance to enable assessment of the Code's effectiveness and extent to which the Code is promoting the confidence of the community in New Energy Tech. The report must also set out any exemptions from Code requirements agreed to by the Administrator. It must also include each finding of breach by the Administrator or Panel and the remedial action or sanction imposed on the relevant Signatory. This information must only identify the name of the relevant Signatory if the Signatory has been suspended or expelled
h) every 3 years, engaging an independent body to undertake a review of the Code and its governance framework including by seeking the views of stakeholders (the review report must be published on the Code website) and revising the Code in light of that review.
Paras A28(f), (g) and (h) are of particular significance. They require the Panel to refer serious or systemic breaches of law to relevant regulators, to publish online an annual report about the Code's operation, including findings of breach and remedial actions taken, and to undertake a review of the Code every three years. Such reports are likely to produce public benefits because they will ensure industry and market scrutiny of the actions and decisions of the Panel under the Code, which will raise awareness of the Code and increase the accountability.
In light of those obligations, a question arises as to the purpose and necessity of imposing further reporting obligations on the authorisation applicants as a condition of authorisation, and whether there is benefit in requiring reporting to the ACCC in addition to the public reporting that is already required by the Code, in circumstances where the ACCC proposes to publish reports on its public register.
The Tribunal does not consider that there is any advantage in requiring two sets of reports to be prepared in respect of the Code. In circumstances where the Panel is required by the Code to publish annual reports, the Tribunal considers that that is an adequate method of publication of relevant actions taken under the Code.
With regard to the content of the Panel’s annual report, the Tribunal considers that the categories of additional information proposed by the ACCC would provide useful information for the dual purposes of ensuring industry and market scrutiny of the actions and decisions taken by the Administrator and Panel under the Code and enabling the ACCC to assess, during the term of the authorisation, whether there has been a material change in circumstances since the grant of authorisation. The Tribunal will therefore require amendments to para A28 of the Code to achieve that objective.
13. CONCLUSION
In conclusion, the Tribunal has determined to vary the determination of the ACCC dated 5 December 2019 granting conditional authorisation to application AA1000439.
In place of the ACCC’s determination, the Tribunal grants conditional authorisation to the following conduct:
(a)the authorisation applicants and future signatories to the Code becoming signatories to, agreeing to comply with and giving effect to the provisions of the Code; and
(b)the persons constituting the Administrator and Code Monitoring and Compliance Panel from time to time performing the functions and powers given to them under the Code.
The above description of the authorised conduct differs in certain respects from the description contained in paragraph 5.6 of the ACCC’s determination. The differences are of two kinds. First, the Tribunal has deleted aspects of the description in the ACCC’s determination that are adjectival or that summarise the effect of some aspects of the Code. The Tribunal considers that those aspects are unnecessary and might suggest an unintended limitation to the scope of the authorisation. Second, the Tribunal has included direct reference to the Administrator and the Panel and their conduct relating to monitoring and sanctioning non-compliance with the provisions of the Code. The Tribunal considers that the description of the authorised conduct ought to make express reference to those bodies to enable them to have the benefit of the authorisation under s 88(2) of the CCA.
The authorisation is granted subject to the conditions set out in Annexure B to this determination (which replace the conditions of authorisation specified by the ACCC).
The Tribunal grants the authorisation for a period of five years from the date of this determination.
I certify that the preceding four hundred and twenty-six (426) numbered paragraphs are a true copy of the Reasons for Determination of the Honourable Justice O'Bryan, Dr J Walker and Ms D Eilert. Associate:
Dated: 15 September 2020
ANNEXURE A
NET Code submitted for authorisation
ANNEXURE B
Conditions of authorisation
Conditions amending the Code
It is a condition of the authorisation that the Code is amended as follows:
(a)Paragraph 3(d) of the Code is deleted.
(b)Paragraph 9(o) of the Code is replaced by the following:
o)conspicuously and prominently on the front page of the quote, your cooling-off and termination rights (if applicable) under the Australian Consumer Law (including the right to terminate a sales agreement within 10 business days if the sale resulted from an unsolicited contact) and this Code
(c)Paragraph 20 of the Code is amended by the inclusion of the following additional subparagraph:
e)if your contract is an unsolicited consumer agreement under the Australian Consumer Law, the front page of your contract will conspicuously and prominently inform you about your cooling-off rights (including the right to terminate the contract within 10 business days) and the manner in which those rights can be exercised.
(d)Paragraph 25 of the Code is replaced by the following:
25. We may offer you New Energy Tech with a deferred payment arrangement as an alternative to upfront payment upon delivery or installation. If you are a Residential Customer, we will ensure that:
a) the deferred payment arrangement is offered through a credit provider (whether ourselves or a third party) that:
i. is licensed under the National Consumer Credit Protection Act (2009) (Cth) ("NCCPA") and the deferred payment arrangement is regulated by the NCCPA and the National Credit Code ("NCC"), or
ii. has had its deferred payment contract and its internal policies and procedures approved by the Administrator in accordance with paragraph A7 of the Annexure – Code Administration
b) the term of the deferred payment contract or lease is no longer than the expected life of the product or system
c) you receive the following clear and accurate information:
i. the name of the credit provider to whom you will be contracted for the arrangement
ii. a clear statement that the deferred payment arrangement is a voluntary finance option
iii. the proposed total cost under the deferred payment arrangement compared with the cost of that same New Energy Tech product, system or service if you were to purchase it outright on that day
iv. the disclosures required under the NCC, including in relation to fees and charges (regardless of whether the arrangement is regulated under the NCC)
v. whether at the conclusion of the deferred payment arrangement
• you own any elements of the New Energy Tech, or
• you have any entitlement to any ongoing services or pricing, and/or
• you have the option to purchase any elements of the new Energy Tech and if so relevant details, including any associated costs, and
vi. a statement that questions and complaints about the deferred payment arrangement should be directed to the credit provider with whom you will be contracted.
(e)Paragraph 32 is amended as follows:
32. If you purchase New Energy Tech that requires physical installation by us, we will ensure your safety and the safety of our installers. We will install in accordance with all applicable safety standards, manufacturer’s specifications, relevant Australian Standards, Energy Network standards and good industry practice, using an installer that is trained, competent and where applicable, holds any required qualification or certification to undertake the work.
(f)Paragraph 61 is amended as follows:
61. We agree to comply with this Code as amended from time to time. We will also ensure that our employees, contractors, agents, representatives and any other individuals or businesses acting on our behalf do likewise. This includes third parties we engage to undertake direct marketing and sales for us.
(g)Paragraph A7 is amended as follows
A7. Where a provider of a deferred payment arrangement requests the Administrator to approve its deferred payment contract and internal policies and procedures for the purposes of paragraph 25(a)(ii), the Administrator must do so if:
a)an appropriately qualified person engaged by the Administrator reviews the deferred payment contract and internal policies and procedures and certifies that they require the credit provider to:
(i) resolve any complaints with the customer using an internal dispute resolution process and, if the complaint remains unresolved, an external dispute resolution process which must include the scheme operated by the Australian Financial Complaints Authority;
(ii) have processes to identify whether the customer is experiencing payment difficulties due to hardship; and
(iii) offer the customer alternative and flexible payment options if the customer is experiencing payment difficulties so that the customer can meet their repayments;
b)the provider of the deferred payment arrangement pays the reasonable costs of the person engaged by the Administrator to undertake that work (costs to be paid to the Administrator in advance of the performance of the work).
(h)A new paragraph A7A is included as follows:
Where the Administrator refuses to approve a provider’s deferred payment contract and internal policies and procedures under paragraph A7, the provider has a right to appeal the Administrator’s decision to the Panel (a fee may be payable by the provider).
(i)Paragraph A15 is amended as follows:
A15. The Administrator may develop supplementary materials to assist Signatories to meet the expectations of the Code. These may include Consumer Information Products, checklists, templates or training.
(j)Paragraphs A16, A17, A18 and A28(b) are deleted.
(k)Paragraph A28 is amended by the insertion of a new subparagraph as follows:
da)reviewing a decision made by the Administrator refusing to approve a provider’s deferred payment contract and internal policies and procedures if requested under paragraph A7
(l)Paragraph A28(g) is amended as follows:
publishing online an annual report about the Code's operation which must include the following information:
(i)the number of applicants admitted as Signatories to the Consumer Code, the number of unsuccessful applications for admittance under the Consumer Code and the number of appeals against a decision regarding admittance, and the outcome of those appeals;
(ii)reporting on Code compliance to enable assessment of the Consumer Code's effectiveness and extent to which the Consumer Code is promoting the confidence of the community in New Energy Tech including the number and type of alleged breaches of the Consumer Code by Signatories;
(iii)reporting on each finding of breach of the Code by the Administrator or Panel and the remedial action or sanction imposed on the relevant Signatory (classified by reference to suspensions, expulsions and other remedial action - this information must only identify the name of the relevant Signatory if the Signatory has been suspended or expelled);
(iv) reporting on exemptions from Code requirements agreed to by the Administrator;
(v)reporting on the Administrator’s approval of unregulated consumer credit contracts, policies and procedures including the number and identity of such credit providers approved.
(m)Paragraph A31 is amended as follows:
A31. A Signatory must comply with the Code.
For the avoidance of doubt, the NET Code may also be amended to revise paragraph numbering and cross-referencing in light of the foregoing amendments and to correct typographical or grammatical errors.
11
0
10