FAQ: Stay on the side of Australian Consumer Law

Consumers raised on decades of tabloid TV foot-in-the-door advocacy presume that car companies, dealers and repairers are a shonky lot, wilfully ignoring obligations and using any excuse to abrogate responsibility.

But in many cases the dealer or repairer may be simply ignorant of the consumer's rights under law. To address this, a number of government bodies committed to consumer protection have joined forces to produce a guide to Australian Consumer Law (ACL) for companies in the automotive industry.

The guide is not some light reading for a rainy Saturday arvo, however; so here it is, in easily digested FAQ form...

Australian Consumer Law codifies consumer protection and holds businesses accountable for dodgy trading with consumers. It replaces previous state and territory consumer-protection laws.

In the context of the guide, ACL applies specifically to vehicle dealers, vehicle repairers, vehicle importers and distributors. Consumers can invoke ACL if a company refuses to honour a consumer guarantee, or fails to honour the guarantee within a reasonable timeframe.

Under the law, infringements may be classified as a 'major failure' or a 'minor failure'.

State and territory consumer protection – i.e.: not ACL – regulates warranty coverage for a vehicle sold by a private individual or auction house unless specifically excluded in the contract of sale.

Private vendors should check with the relevant consumer protection authority in their state.

Vehicles purchased before January 1, 2011 are covered by the predecessor to ACL, the Trade Practices Act 1974. Vehicles purchased specifically to on-sell are excluded, so dealers cannot invoke ACL in a dispute with a wholesaler.

Vehicles that are leased or hired are still subject to the ACL, but in watered-down form.

Dealers do not have to guarantee title and undisclosed securities.

Suppliers could be manufacturers in some cases, but are usually defined as dealers or repairers. They must guarantee to the consumer:

• Goods will be of acceptable quality
• Goods will be fit for any purpose disclosed before sale
• Goods will match their description
• Goods will match the sample or demonstration model
• Suppliers will honour any express warranties
• Consumers will have title to the goods
• Consumers will have undisturbed possession of the goods
• Goods will not be subject to undisclosed securities

• Goods will be of acceptable quality
• Goods will match their description
• Manufacturers will honour any express warranties
• Manufacturers will make available repair facilities or spare parts for a reasonable time

The guide defines acceptable quality as: safe, durable, free from defects, acceptable in appearance and finish, fit for all the purposes for which vehicles of that kind are commonly supplied.

In the event that the vehicle sold fails to meet the required standard for any of those criteria – but the dealer makes that clear to the purchaser before the sale contract is signed – ACL doesn't apply. Nor will the law apply if the buyer could be reasonably expected to have found the defect prior to purchase.

This excludes defects that would be hard for a buyer to trace – gearbox internals, for instance.

If you are a private individual selling a car through a site like carsales.com.au, you too are subject to ACL constraints, although ACL is tougher for licensed motor car traders.

Private vendors and auction houses are only required to guarantee title, undisturbed possession and undisclosed securities.

For major failures – a catastrophic mechanical malfunction like a conrod punching a hole through a cylinder block, as one example – ACL will hold the supplier, repairer or manufacturer accountable for the remedy, even if the factory warranty has expired.

In the event that a consumer has purchased a car and agreed in the contract of sale to waive consumer protection rights, the major failure is still covered by ACL. Suppliers and manufacturers cannot obviate the provisions of ACL by just writing terms into a contract.

The warranty doesn't supplant ACL, and suppliers should take care that they don't mislead consumers to believe that ACL doesn't apply during the period the vehicle is covered by a factory warranty.

According to the guide, a supplier's complaints handling system should embrace consumer rights and recourse to ACL.

A consumer may find that neither ACL nor the factory warranty will cover the cost of repairing a vehicle if the damage/defect was directly due to abuse by the vehicle operator.

The guide distinguishes between this sort of abuse ('abnormal use') and normal wear and tear. Neither is covered by ACL (nor warranty coverage, usually), but abnormal or premature wear and tear could be an indicator of a vehicle that is not of 'acceptable quality' and therefore would be covered by ACL.

The guide provides plenty of examples to illustrate the sort of abuse that would void warranties and ACL. Such as:

• Leaving a convertible's top down during a storm
• Filling the tank of a diesel vehicle with petrol
• Towing a horse float with a small car
• Driving a two-wheel drive vehicle for a longer period on roads suitable for four-wheel drives only

The guide states that a major failure could be a situation in which the consumer purchases a new vehicle that is subsequently returned repeatedly for multiple defects that cannot be repaired permanently by qualified repairers.

Another major failure may arise out of the delivery of a vehicle with the wrong specification – not the vehicle that was ordered when the sale contract was signed, in other words. And in the event that a vehicle advertised as capable of towing 3500kg overheats once it's loaded up with a 2500kg payload – that would be considered a major failure.

What are the remedies available to a consumer for a major failure?
A vehicle that has been purchased and is not of acceptable quality, or is unfit for purpose, or doesn't match the description advertised will be the basis for a major failure claim if the supplier or manufacturer cannot remedy the problem in a reasonable timeframe.

In that event, the consumer is entitled under ACL to demand a replacement vehicle, a refund or a repair. The consumer may also keep the vehicle and demand compensation from the supplier or manufacturer to offset future loss of value.

• If the vehicle is immobile and cannot be returned to service in a reasonable timeframe (more than 'several days', according to the guide)
• If a series of minor defects in rapid succession keep the vehicle off the road for an extended period while repairs take place

• If the rejection period has passed
• If the consumer has lost, destroyed or disposed of the vehicle
• If the vehicle was damaged after the consumer took delivery of it
• If the vehicle or a component of the vehicle has been attached to another property and cannot be removed without occasioning damage
• If the vehicle has been subject to owner abuse

Suppliers are not required to refund the purchase price of a vehicle simply because the buyer has decided he or she no longer wants the vehicle.

The guide reveals that the rejection period is yet to be fully tested in the courts, but could be expected to exceed the factory warranty period applicable for the vehicle purchased.

The guide seems to imply that up to 'several days' for repair could be considered reasonable, given the time that may elapse between ordering parts and taking delivery of those parts.

But longer than that may be unreasonable, and also unreasonable would be several attempts to repair the same fault without success. At that point, a minor failure becomes a major failure.

A consumer cannot demand compensation, a refund or replacement vehicle for a minor failure. But the consumer is entitled to seek repair for the vehicle at the expense of the supplier or manufacturer.

Under ACL, a consumer may seek replacement of a vehicle if it is essentially undriveable and the dealer cannot repair the vehicle to a fit state. This is the case even in the event that the warranty has expired.

A dealer may seek reimbursement from the manufacturer for a vehicle found to be of unacceptable quality, not matching the manufacturer's description or unfit for purpose.

The reimbursement is for costs incurred by the dealer, who can legitimately reclaim these costs from the manufacturer within a three-year timeframe.

‘Our goods come with guarantees that cannot be excluded under the ACL. You are entitled to a replacement or refund for a major failure and compensation for any other reasonably foreseeable loss or damage. You are a also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.’

The manufacturer must also set out all relevant claim periods and procedures, must list the warrantor's name, business address, phone number and email address, and must ensure all wording is expressed in plain language (no legalese).

A warranty that expressly states the capabilities of a vehicle is an express warranty. Whereas a manufacturer's warranty usually declares simply that defects will be rectified, an express statement that a vehicle can tow 2000kg or climb a 40-degree slope will be the basis for a justifiable claim by the owner if it can be proved that the vehicle cannot undertake those two tasks, as examples.

An extended warranty can be purchased by a vehicle owner for a specific length of time after the factory warranty expires. The guide cautions suppliers of extended warranties to provide some additional features or protection that would not be available through ACL, since that would be misleading.

Consumers would be paying for features already available to them in law. Suppliers should not force consumers to purchase extended-warranty coverage or insinuate that extended-warranty coverage provides features and benefits beyond those available through ACL.

Used cars sold throughout Australia are covered by statutory warranties, which are regulated by state or territory law. As with new-car (manufacturer's) warranty, the statutory warranty doesn't supplant ACL, which continues to apply to a used car sold to a consumer even after the statutory warranty expires.

If a new vehicle is sold with a manufacturing or design defect that leads to major failures for multiple consumers, the guide does NOT recommend coercing those consumers to sign a non-disclosure agreement.

This is a tactic that has been used in the past for PR damage control, but the manufacturer that links the remedy with non-disclosure is very likely to be in breach of ACL.

It's also a bad look if a manufacturer tells hundreds or thousands of consumers that their dodgy transmission will be fixed under warranty, as long as the consumers don't say a word to the media. And the consumers themselves are not required to sign an NDA or agree to keep quiet because they're entitled to have the major failure fixed under ACL – whether or not the fault is covered by warranty.

Repairers are also exposed to minor or major failure claims, if a repairer fails to identify a major engine fault as an example of the latter, or the repairer botches rectification of hail damage so badly the work has to be carried out again.

Conversely, repairers cannot charge for what the guide describes as 'unauthorised repairs'. The example provided by the guide cites a consumer taking a vehicle in for a service, expecting only to pay up to about $450, but then being confronted with a bill for 10 times that much because the repairer decided to refurbish the vehicle's transmission without discussing with the owner first.

Consumers are to be informed if the repairer uses refurbished replacement parts rather than new parts. A major failure by a repairer can result in the consumer demanding a refund for the difference between the quoted price of the service and the end result.

The consumer can also cancel the service and demand a refund for any work that hasn't been carried out by the repairer – assuming the bill for the work was paid in advance. Whichever course is chosen, the consumer makes the call.

ACL allows consumers to select qualified repairers to carry out log-book servicing. And if a servicing dealer cannot effect repairs for a fault within a 'reasonable time', the vehicle owner may have the vehicle repaired elsewhere and seek a refund ('reasonable costs') for the work undertaken. This applies to cars sold new under ACL as well as used cars that are subject to statutory warranty coverage.

Consumers may also claim 'consequential loss' under ACL. If a vehicle is damaged as a consequence of a fault, and other property is damaged, including property belonging to the vehicle's owner, the owner may claim costs to replace or repair that property.

You can see the guide here

Other ACL guides are available at the Australian Consumer Law website

Who was involved in producing the guide:
Australian Competition and Consumer Commission
Australian Securities and Investments Commission
Access Canberra
Consumer Affairs Victoria
Consumer, Building and Occupational Services Tasmania
New South Wales Fair Trading
Norther Territory Consumer Affairs
Queensland Office of Fair Trading
South Australia Consumer and Business Services
Western Australia Department of Mines, Industry Regulation and Safety (Consumer Protection)