Disclosure obligations for NSW businesses

Find out what you must disclose to a customer if you are a business or intermediary when selling a good or service in NSW.

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As a business owner, you should be aware of the disclosure requirements to communicate with customers before completing a sale. The disclosure requirements also include intermediaries such as:

agents
brokers.

The obligations require:

businesses to disclose terms or conditions of contracts that substantially prejudice the customer
intermediaries to disclose if they have commission or referral arrangements with another supplier.

Disclosure must be made before a business supplies the goods or services and before the consumer:

signs the contract
makes a payment, or
commits to the supply of goods or services.

Early disclosure can lead to less complaints down the road.

Common types of intermediaries

Agents

An agent is generally a person who acts on behalf of a client who they have a contract with as part of an agent-principal relationship.

Common examples of agents include:

real estate agents
travel agents.

Brokers

A broker is someone who buys and sells goods or services on behalf of others. This can involve arranging or negotiating services.

A common example is a mortgage broker who:

supplies tailored information and advice, or
arranges for the mortgage to be agreed between the consumer and financial institution.

Other intermediaries

Disclosure requirements can also include intermediaries who may not necessarily arrange the contract or agreement but may refer a consumer to another supplier. Intermediaries should disclose to a consumer any arrangement in which they receive:

a referral fee, also known as a kickback
spotter’s fees, or
finder’s fees.

An example is an aggregator website that compares services or products from multiple providers and receives payment for directing consumers to engage with those providers.

If you are unsure that you are an intermediary, you should seek independent legal advice.

Disclosure obligations

For businesses

Under the section 47A of the Fair Trading Act 1987 (the Act) businesses must take reasonable steps to ensure that consumers are aware of the substance and effect of terms. This should include at least the following terms which:

limit the liability of the supplier
provide the customer is liable for damage to delivered goods
permit the supplier to provide data about the customer, or data provided by the customer, to a third party in a form that may enable the consumer to be identifiable by the third party
require the consumer to pay:
- an exit fee
- a balloon payment, or
- another similar payment.

Please note that this list is not exhaustive, and businesses must disclose other terms or conditions that may substantially prejudice the interests of consumers.

There are no exemptions.

For intermediaries

Under section 47B of the Act, intermediaries must:

take reasonable steps to make consumers aware of any commission, or
disclose referral arrangements where they receive a financial incentive from another supplier.

Intermediaries do not need to disclose the nature or value of the financial incentive.

You are an intermediary if you, under an arrangement that provides for a financial incentive:

arrange contracts for the supply of goods or services from another supplier on behalf of a customer as an agent, or
refer a consumer to another supplier of goods or services.

Disclosing terms and conditions

Terms that exclude the liability of the supplier example

An indoor recreation centre includes a term in their written terms and conditions, which states that they are not liable for any injuries arising from participation in the activities they provide.

Terms that provide that the consumer is liable for damage to goods that are delivered example

A courier company has a term in their online contract that the client bears the risk of any goods that are transported by the company and that the company is not responsible for any loss, detriment or damage suffered by the client or any other person.

Terms that permit the supplier to provide data about the consumer, or data provided by the consumer, to a third party in a form that may enable the third party to identify the consumer example

An online food delivery service has a term that allows them to disclose their customers’ personal information to other people, including third party service providers, and third parties that collect and process data such as Google Analytics.

Terms that require the consumer to pay an exit fee, a balloon payment or other similar payment

Exit fee

An exit fee is a fee charged to exit or terminate an agreement, including if the contract is ended early. An exit fee may also be called:

a cancellation fee
a termination fee, or
another similar name.

Balloon payment

A balloon payment is a large final payment at the end of a loan to clear the debt. This is usually where the borrower pays reduced monthly instalments on the loan.

An example can include a car dealership offering finance plans that include balloon payments at the end of the loan. This means that at the end of the loan the customer will have to pay the remainder of the principal amount in one large sum.

Types of arrangements

An arrangement can be:

formal, such as a written contract, or
something informal such as a verbal agreement.

An arrangement which provides for a financial incentive will involve:

a supplier who is an intermediary that receives the incentive, and
one or more other suppliers who provide the incentive.

Commission arrangements

A consumer usually makes a purchase through an intermediary in commission arrangements. The payment goes to a third party supplier and the intermediary receives a portion of that payment. This portion is commonly called a commission and is generally paid out as a percentage of the sale, but it may be a flat fee.

Examples of a commission arrangement

A website offers comparisons of retail energy packages. Consumers coming to the site give their details and preferences, and the website makes a recommendation based on those preferences. The consumer pays no fee for this service. Instead, the site signs up consumers with energy providers and it is the providers who pay the website. For every new consumer signed up to a provider, the website will get a percentage of the payments.
A customer goes to a travel agency to help book a hotel for their holiday. The travel agent finds a hotel through their database that is suitable and makes the booking. The customer pays at the travel agency. The agency relays the money to the hotel but receives a percentage of the amount as their payment for connecting the customers to the hotel.

Referral arrangements

A third party supplier pays a fee to the intermediary for directing a consumer to the supplier in referral arrangements. In this case, the purchase is made directly from the third party supplier and not through the intermediary.

Example of a referral arrangement

A builder is assisting their client with the construction of a new house. The client needs tiles for the kitchen and bathroom, and the builder recommends a particular tile supplier. The builder has a previous arrangement with the tile supplier and the builder will receive a flat fee for every client they refer to the business.

Third party arrangements

Generally, it is better to disclose any third party arrangements to consumers. Seek independent legal advice if you are not sure about third party arrangements.

Reasonable steps

Taking reasonable steps will mean taking actions that one would reasonably expect would create awareness in a consumer. The steps you take to disclose must be:

appropriate in the circumstances, and
sufficient to create awareness in the consumer.

Reasonable steps you can take

You should:

be clear, upfront and automatic
have a clear disclosure that is easy to understand
have a disclosure that allows a consumer to seek out the information they are looking for
automatically include a disclosure as a standard part of each transaction.

To make the customer aware of terms, conditions, commissions, or referral arrangements, draw their attention to them and provide an explanation. To determine what steps would be reasonable to do this you should:

consider any available tools, and
decide which of those are the most appropriate for your business and customers.

Available tools

Here are some examples of how businesses or intermediaries might disclose.

Key terms or conditions

Use short, plain English summaries on the front page of a contract.
Provide information in short chunks at key times for the customer, such as on the information or payment page.
When online, make information appear on screen in a scrollable text box.
Use comics, illustrations or icons to highlight and explain relevant information.

Commission or referral arrangements

Include a disclosure on quotations provided to the customer.
Direct customer attention to appropriate signage.
When online, disclose relevant information on the same page as the product or service’s description.
Have the disclosure appear in a pop-up box for online disclosures.
Put an automatic disclaimer on the bottom of emails.

Deciding on the right tool

When considering which steps would be appropriate for your business, consider:

The nature of your business:
- What goods or services do you sell?
- How do your customers interact with your business?
- How does the business influence customers to make a purchase?
- Who is your target market? Are they young, from diverse language groups, or otherwise vulnerable?
The nature of the term or condition that you must inform the consumer about:
- What is the impact on the consumer?
- How may the existence of the term substantially prejudice the consumer?
The nature of the third party commission or referral arrangement to be disclosed:
- Which arrangement is in place?
- Are you clearly disclosing the existence of the arrangement?
Where is the transaction taking place? In store, over the phone, or online?
Any procedures that the business already has in place to inform your customers of these matters:
- Existing signage that discloses key terms or conditions, or commission or referral arrangements.

Accessibility

Ensuring that your website has screen reader compatible web pages, using inclusive colour schemes and alternative text for images to help people of all abilities to use your site.

Knowing if you have taken reasonable steps

The best way is to ask the customer directly. Ask the customer to confirm they are aware such as:

verbal confirmation
initialling a contract, or
checking a box on a web-form.

After confirmation, the customer should acknowledge and understand:

the existence of commission or referral arrangements, or
the substance and effect of key terms or conditions.

Terms or conditions reasonable steps example

A local tennis club has designed their membership agreements to feature a short, half-page summary of the key terms of the agreement on the front page. When a new member is signed up, staff have them initial the bottom of this front page to acknowledge that they have read the key terms.
A video streaming website has a term in their terms and conditions which states that they may share customers’ personal information with third parties. When the customer is entering their personal information to the webform to sign up for the service, a pop-up box appears to inform the customer of this term that explains that their personal information will be provided to third parties to use for other purposes than what they originally provided.

Commission or referral arrangements example

A graphic designer creates logos and other symbols for their customers to use on websites but does not create websites themselves. Instead, they have an arrangement to recommend customers who are looking to create a website to a particular web developer. Before making the recommendation, they disclose that they will receive a referral fee if a customer decides to use the recommended developer. They verbally confirm with the customer if they wish to go ahead and then follow the usual procedure to put customers in contact with the developer.
An aggregator website facilitates bookings for car hire by listing cars from a variety of providers, with the bookings made through the aggregator. The site has arranged that every time a consumer clicks the button to proceed with a particular booking, a pop-up message appears on screen advising that the company has a commission arrangement with the provider of the vehicle. The customer can tick a box to confirm their awareness before being directed to the next page where they review the booking and proceed with payment.

There are no exemptions from either the intermediary or the business requirement.

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