Fair Trading (Lay-By) Amendment Bill

About this Item
Speakers - Chadwick The Hon Virginia; Jones The Hon Richard; Shaw The Hon Jeffrey; Sham-Ho The Hon Helen; Nile Reverend The Hon Fred
Business - Bill, Second Reading

FAIR TRADING (LAY-BY) AMENDMENT BILL

Suspension of certain standing orders agreed to.

Second Reading

The Hon. VIRGINIA CHADWICK (Minister for Education and Youth Affairs, and Minister for Employment and Training) [6.0]: I move:

That this bill be now read a second time.

The purpose of the bill is to remove undue restrictions on lay-by sales transactions by repealing the Lay-by Sales Act 1943 and to provide for a new simplified lay-by scheme by amending the Fair Trading Act 1987 to incorporate appropriate provisions. The new provisions will establish consumer remedies through a clear refund structure in the event of the absence or inaccuracy of a written lay-by statement. The major problem area has been disputes between supplier and consumer about the amount of refund, or indeed the lack of any refund, after a cancellation, or what happens when the goods are not available. Consumers generally think they should get all their money back, and suppliers often think that they can keep the deposit or some other greater amount. Depending on the circumstances, both may be right, but the old Act is not always clear or easily understood.

The old Act was found to be overprescriptive, incomprehensible in parts, and outdated. It is not actively enforced because it does not provide any deterrent to offenders nor any remedies for consumer loss. In response to community feedback, the proposed new provisions fill the need to clarify the rights and remedies of both the supplier and the consumer. Although much of any lay-by arrangement is left to the consumer and supplier to decide upon, the keystone provision of the proposed new scheme will be a requirement for the supplier to give to the consumer a written statement, to be called the lay-by statement, containing all the relevant terms of the transaction at the time of entering the lay-by. Without actually prescribing the terms, the proposed provision gives some examples of what may be considered as important and relevant terms, such as the cancellation fee.

It is up to the supplier to decide what information is relevant or not, and whether a statement is given as a sales docket, a receipt or an envelope, or anything else. The new scheme will allow the consumer to cancel the lay-by at any time before its completion, subject to the specified cancellation charge. It also allows the supplier to cancel if the consumer has defaulted on payments, subject to the specified cancellation charge. All other moneys must be refunded. Failure to comply with the fundamental requirement of providing a lay-by statement will not be an offence, but will lead directly to clear remedies for the consumer. The supplier will not be allowed to keep the cancellation charge if: the supplier has breached any term of the lay-by, such as supplying goods which are not as ordered; the goods were not supplied at all; there was not a written lay-by statement; there was no cancellation charge specified in the lay-by statement; or any term was misleading, deceptive or materially false.

The proposed scheme imposes a limit on the cancellation charge payable when the lay-by is cancelled. The charge is not to exceed the supplier's reasonable selling costs and an amount, if applicable, for loss of value of the goods. The onus is on the supplier to establish those reasonable selling costs, and any loss of value, and that the loss of value could not have been avoided. The issues of what is reasonable and when is a loss of value chargeable will be part of a program of education for both consumers and suppliers. Although the cancellation charge specified in the upfront lay-by statement may be taken as an agreement between the two parties, the passing of time between early or later cancellation may vary the reasonableness of any ostensible selling costs. It is also expected that any cases of loss of value will be infrequent. In any event, the consumer maintains a right to dispute these matters in a court or tribunal.

The new scheme also provides that the supplier will not be entitled to demand full payment before the end of the lay-by period. It will also be an offence to contract out of the new provisions; that is, to include a term in the lay-by statement which excludes, modifies or restricts the operation of these provisions. The maximum penalty for that offence will be $5,000. The bill provides for miscellaneous amendments to the Fair Trading Act to extend other remedial provisions of that Act to the new part. These proposals as a whole represent a recognition that lay-bys are an increasingly popular business arrangement for suppliers to attract customers, and for customers to organise their shopping without resorting to overuse of credit cards. It is a system of trading worthy of preservation. Allowing time for further consultation with the Retail Traders Association to ensure consistency of promotional materials, commencement is proposed for August this year. I commend the bill to the House.

The Hon. R. S. L. JONES [6.4]: The Australian Democrats support the Fair Trading (Lay-by) Amendment Bill. This legislation repeals and updates the Lay-by Sales Act 1943. I thank the Minister for Consumer Affairs and Assistant Minister for Education and her advisers for briefing me on this legislation. It appears that most problems arising from the increasing use of lay-bys relate to whether or not buyers can claim refunds of deposits and payments when cancelling a purchase. About 200 cases a year
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involve disputes between purchasers and vendors and I believe that many, if not all, of these disputes will be eliminated by the provisions in the legislation. While the legislation is far less prescriptive than the 1943 Act, it will nevertheless be more effective, in my view.

When a purchaser makes a decision to lay-by, the purchaser will be given the conditions of the lay-by, including the cancellation fee, at the time of making the first deposit. A person who decides to cancel a purchase will now know exactly how much he is liable to lose. The vendor may well have different cancellation fees depending on how soon after the initial deposit the purchaser cancels. For example, if the purchaser cancels the day after putting a deposit on an item, there may well be a 100 per cent refund. If, however, the vendor has had to have the item specially manufactured for the purchaser, the cancellation fee could be very high if cancellation occurs after the item has been manufactured. The details of the cancellation fee must be given to the purchaser at the time of entering the contract. If no cancellation fee is mentioned on the document given to the purchaser, the vendor may not claim any cancellation fee at all.

It is interesting to see that the use of lay-by has been increasing lately. The honourable member for Mount Druitt, the shadow minister for consumer affairs, provided a list of companies offering lay-by in his speech in the other place on 12th May. Conditions vary from store to store. I have no doubt that when charges for credit cards are introduced so that there is no longer a free period, people will use the lay-by system even more. I believe also that many people have been frightened by the size of their credit card bills and are going back to what might be deemed an old-fashioned way of buying items. I note that the Minister herself uses the lay-by system for purchasing Christmas presents. One of her reasons for doing this is to ensure that she can keep her Christmas presents secret until she can pay for them and bring them home.

My first experience of lay-by was for a blue and white painting of yachts on Sydney Harbour by an artist called Stodulka, which hung on the wall of a restaurant which I frequented, opposite the place where I worked at 119-121 Liverpool Street. Both the restaurant and the place where I worked have long gone, through what is called redevelopment, but I still have the painting on my wall, at home. I believe that lay-by is a very safe way of buying stock. It saves people the heartache of being landed with the bill some weeks later. It helps to prevent people from going over their heads in debt. Unless they have paid for the item, they do not get it. I, for one, hope that the lay-by system will boom.

The Hon. J. W. SHAW [6.8]: I must confess that in recent years I have not given a great deal of thought to the institution of the lay-by. I suppose that reflects the era of the credit card. Certainly I recall growing up in the 1950s when our family used lay-bys as a means to purchase various goods. It is obvious that in more difficult economic times the lay-by is again becoming common, as it used to be. An examination of the bill reveals that it is a competent piece of consumer protection. Its terms are simple; it makes clear prescriptions about the rights of purchasers and sellers using the lay-by method. Consistent with many bills I have read recently, it is an example of good, clear, modern drafting in the New South Wales jurisdiction.

I am increasingly becoming an admirer of the work of the Parliamentary Counsel. First, the bill contains a definition of a lay-by. Proposed section 60E defines the meaning of a lay-by for the purposes of the legislation. It states the entitlement of the consumer to a written statement of the terms governing the lay-by and provides a right to cancel the lay-by if the consumer notifies the supplier in writing that the consumer wants to cancel. Obviously that must be done before the point of delivery. The bill explains the consequences of cancellation. A cancellation charge is allowable, but restrictions are placed on it so that it cannot exceed a reasonable sum. Neither consumers nor sellers of goods can contract out of the legislative provision. All in all this is good legislation and the Opposition is happy to support it.

The Hon. HELEN SHAM-HO [6.11]: It gives me great pleasure to support the Fair Trading (Lay-by) Amendment Bill, which will have far-reaching benefits for the public. This is a significant and progressive milestone for consumer spending. The purpose of the bill is to simplify the lay-by process for retailers and buyers alike. By repealing the Lay-by Sales Act of 1943 and amending the Fair Trading Act the Government will streamline lay-by laws for the good of everyone. In these continuing tough economic times any measure that will encourage people to better manage their finances and thus alleviate credit problems is to be commended. I am pleased to learn that the Opposition fully supports the bill. No sensible person would not support the measure. Most of my honourable colleagues will remember when credit cards were not available and many major purchases were made by using the lay-by system. It was a good means of purchasing goods.

The Hon. Virginia Chadwick: For some people who could not afford to buy them, it was the only means.

The Hon. HELEN SHAM-HO: As the Minister said, for some people it was the only means of buying Christmas and birthday presents, new furniture, electrical appliances, clothes and for children to purchase the latest record. People were able to budget for a purchase because they knew that they had a limited time within which to pay it off. In the 1970s credit cards and hire purchase became available. For many these have become the only means of purchasing various items. Unfortunately, for some people it has caused also appalling credit problems. Obtaining credit has become much easier, and putting it on the plastic - as I do all the time - and worrying about paying only later has become a way of life for many people. I well remember when I was a
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social worker a number of people who had got themselves into disastrous financial situations; they were demoralised and degraded by constant visits from debt collectors and by an inability to extricate themselves from their difficulties. I had to arrange financial counsellors for many of my clients and often had to deal with retail stores, I recall Waltons being one at that time.

With the advent of credit cards lay-bying of goods became less popular and many retailers stopped offering that facility. For those who used the lay-by system the regulations were unclear, overprescriptive and often not enforced when disputes arose between sellers and buyers. No party was quite sure of its rights under the Acts governing purchases. The principal disputes concerned rights to refunds upon cancellation and the unavailability of goods after payment. The Government is intent on rectifying those problems by introducing this legislation. To ascertain the aspects of the existing legislation that needed changing, the Lay-by Sales Act was reviewed in 1992 as part of the consumer law review program. The consensus of opinion following that review was that basic requirements for lay-by transactions should be maintained after they were simplified and made more effective through fair trading legislation. The bill will meet that requirement.

The main provision is that purchasers will receive a written lay-by statement upfront, explaining their rights and obligations, including the right to a refund and the obligation to pay a cancellation fee, as well as the date by which final payment must be made. These matters are spelled out in proposed section 60F. The other main features that will be inserted into part 5B of the Fair Trading Act include proposed section 60E, which defines a lay-by and makes it clear that the goods ordered under a lay-by need not be in existence or in the supplier's possession at the time the lay-by commences.

A consumer's right to cancel at any time before the goods are delivered is provided for in proposed section 60G. A full refund is made subject to payment of an agreed cancellation charge under the provisions of proposed section 60I. A supplier will have the right to cancel and to keep agreed cancellation charges if a consumer breaches a term of the agreement. That right will not apply if the supplier has breached any term of the lay-by, if the goods are unavailable, or if the required lay-by statement is not given to the consumer or is misleading. All other amounts must be refunded to the purchaser, as provided for in proposed sections 60H and 60I.

Proposed section 60J will limit the supplier's rights and remedies to the entitlement to a cancellation fee only if specified at the beginning of the transaction and if the consumer cancels or defaults. Under proposed section 60K a supplier will not be allowed to demand full payment before the date specified in the lay-by statement. A limit on the cancellation charge payable when the lay-by is cancelled is specified in proposed section 60L. Proposed section 60M sets out that the supplier will not be allowed to contract out the provisions of the lay-by. It is important to note that any other rights consumers may have under other legislation, such as the Sale of Goods Act, will not be affected, provided they are consistent with the operation of the proposed insertion of section 60N into the Fair Trading Act.

I am sure all honourable members will agree that the proposed legislation will give a good message to the public: the Government understands that in the present economic recession every effort must be made to lessen the hardships many people are suffering. The Government wants to encourage people to practise saving for purchases and to buy what they can comfortably afford, rather than living beyond their means by succumbing to every temptation that credit cards present. As a result of the Federal legislation introduced last week that enables banks to charge fees for credit cards, it can be expected that even more economic hardship will be experienced by some people. The New South Wales Government wants to help citizens to lighten their credit burdens, not increase them. The Government will assist people by facilitating the lay-by system and encouraging shoppers to budget for their purchases and prevent credit card abuse.

The legislation will encourage more retailers to offer lay-bys, and this will ultimately improve the economy. It is well known that the Fahey Government is continually striving to improve the economy, in spite of the irresponsible policies of the Keating Federal Government which do not make the economic situation any easier. On a lighter note, by revising lay-by regulations the Government will make shopping for presents much easier for parents. Who has not had the problem of hiding children's birthday and Christmas presents away from inquisitive eyes, waiting for the special occasion? By lay-bying goods one can be assured of having the desired present but only needing to collect it the day before the special occasion.

The Hon. J. R. Johnson: One has to be careful that the storage place does not burn down in Christmas week, as happened to me.

The Hon. HELEN SHAM-HO: That was unfortunate; but it does not happen frequently - only once in a blue moon. Presents can always be collected shortly before they are needed. That will be one of the benefits of the legislation. I support the bill.

Reverend the Hon. F. J. NILE [6.19]: The Call to Australia group supports the Fair Trading (Lay-by) Amendment Bill. The object of the bill is to replace the existing Lay-by and Sales Act of 1943 with simpler and less prescriptive provisions for the protection of consumers under lay-by sales laws. The various new provisions of the bill will become part of the Fair Trading Act. For many years the lay-by system has worked effectively, in particular for people on low incomes, working-class people and those who are short of cash. By this method customers have been able to secure a particular item until such time as they save the cash for the lay-by payments. Even though customers cannot take the item home until the last payment has been made, they have a sense of ownership and satisfaction.

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In recent times credit cards have taken over from the lay-by system, but buyers did not realise that because of high interest rates credit cards would be far more expensive than the lay-by system. Despite considerable agitation to reduce those interest rates, they have been reduced only slightly compared with the interest rates paid by banks. The Federal Government has given the green light for a $30 annual credit card charge, but without a guaranteed reduction in interest rates. That is a disgrace. The bill will provide consumer protection, will make the system more workable and, with adequate marketing, in future will probably take the place of credit cards. This will restore the lay-by system to its rightful place in the retail area. The Call to Australia group supports the bill.

The Hon. VIRGINIA CHADWICK (Minister for Education and Youth Affairs, and Minister for Employment and Training) [6.21], in reply: I thank all honourable members for their support of the bill and the lay-by system. I have many fond, and sometimes not so fond, memories of using the lay-by system extensively. From the comments of honourable members on both sides of the Chamber I suspect that they, too - particularly the Hon. Helen Sham-Ho and the Hon. Elaine Nile - have been grateful for the lay-by system. As with many honourable members, my family grew up with the lay-by system and on pay week part of the kitchen bench was liberally sprinkled with bits of paper stapled together and money on each docket in an effort to pay off lay-bys. As an impoverished university student on a scholarship I fell into this habit and I suspect I am not alone in still having fairly depressing memories of changing my scholarship money into ten shilling notes, laying out all my lay-by papers along my bed and finding that there were not enough ten shilling notes to cover each pile of lay-by dockets.

Despite the rather depressing realisation that even with lay-bys a university student was still living beyond his or her means, the system is practical and has served the Australian community well. I never understood why it fell into disuse. Perhaps it was because of some of the unwieldy mechanisms and lack of clarity in the rules, laws and regulations surrounding it. As the Hon. Helen Sham-Ho said, our fascination with bits of plastic probably helped lay-bys fall into disuse. Robert, the husband of the Hon. Helen Sham-Ho, must be an extremely tolerant man. I would never say in this Chamber that I have used plastic cards extensively in case my husband read that. The lay-by system is a practical mechanism for many people in the broader community and in times gone by many honourable members have been thankful for it. I thank honourable members for their support and commend the bill to the House.

Motion agreed to.

Bill read a second time and passed through remaining stages.

[The President left the chair at 6.25 p.m. The House resumed at 8.30 p.m.]

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