Are you aware of new ACL warranty changes?

Does your business provide goods or services to consumers? If you do, you may not be aware of recent changes to prescribed wording of warranties under Australian Consumer Law (ACL), which if not implemented, may cost your business thousands of dollars in fines.

These amendments came into effect in early June and require suppliers of goods and services to include compulsory wording in warranty agreements, which easily explains consumers’ entitlements, and advises that warranties cannot override consumer rights. The impact of non-compliance is significant and may result in the imposition of fines up to $50,000 for companies as well as potential civil and criminal penalties.

The most important of these changes relates to warranties against defects. If you are a business that supplies consumers with services, or goods and services together, you now must include mandatory text within any warranty agreement. Previously, the mandatory text only referred to goods.

If you think your business could be impacted by these changes, the first step is to assess whether you provide “goods” and/or “services” to “consumers”. The ACCC has outlined what makes a person a consumer, for example, if they purchase goods or services valued at less than $40,000 or if they purchase a vehicle or trailer primarily used to transport goods.

Next, it’s important to determine if your customer is going to use the product or service for personal consumption or if they are to be sold to another party. If your business is clearly B2B and you do not deal with consumers, it’s safe to assume that the new rules won’t apply to you.

If the above points apply to your business, it’s important to comply with the new ACL requirements.

Express warranties

The rule of thumb is to provide as much information that’s practical for your customer to digest, without confusing them. You will need to include the quality, state, condition, performance or characteristics of the

product. This may be done verbally however best practice is to incorporate into written documents. You will also need to outline what the product can do and for how long, as well as the availability of servicing or supply of parts and products.

Warranties against defects

A warranty against defects is a guarantee communicated to the consumer that if the goods or services (or components of the product) are defective, the business will repair or replace, resupply or fix, or provide compensation to the consumer.

This could be included in any material and doesn’t have to be in a formal document, for example, wording on a label or packaging. It’s important to include the basics, like the warranty period and the actions required by the consumer to claim the warranty.

What information do you need to include?

There are three clauses required within your warranty agreements. These clauses act as an alert for consumers to become aware of the ACL rights and remind them that consumer guarantees cannot be excluded.

The clauses required include the supply of goods only, the supply of services only and the supply of both goods and services. It’s important to remember as businesses are more likely to supply goods and services, it’s recommended to adopt the third clause as a safety measure. You can access the clauses and further information that must be included on the ACCC website.

The changes introduced are somewhat clunky and difficult to understand. However, with steep penalties in place, it’s imperative to take the time and assess the finer details. After you’ve taken the time to implement these changes it’s a great opportunity to review your overall business trading terms holistically.

Roger Mendelson, CEO, Prushka Fast Debt Recovery

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