The Commerce Commission has begun enforcing the new unfair contract terms provisions of the Fair Trading Act which came into effect 17 March 2015, with no grace period for businesses.
Unfair contract terms relate to clauses in standard form consumer contracts. The main hallmarks of these contracts are that the terms have been offered to the consumer on a ‘take it or leave it’ basis, and the contracts relate to goods and services that are usually for personal use. From 17 March, it will be unlawful to include an unfair term in a standard form consumer contract.
The Commission has said it will start targeting contracts in industries that have proven problematic overseas or where they have received complaints in the past. These sectors include telecommunications, rental cars, fitness, airline, and online trading. They are also concerned about loan contracts, particularly those provided by lower-tier finance lenders that can be harsh on vulnerable consumers.
The Commission will be paying careful attention to terms that limit competition, such as automatic ‘rollover’ or renewal terms and terms that lock consumers into contracts that they wish to exit, preventing them switching to a competitor.
The Commission’s guidelines are available online. A fact sheet for consumers that will enable them to identify unfair contract terms is also being developed and will be released shortly.
Read more on the Commerce Commission's website