Did you wake up feeling different on the first day of January this year?  Probably not—but some important changes were made to the Australian Consumer Law (the ACL) relating to unsolicited selling that you should be aware of.

“Unsolicited” selling occurs when a salesperson—typically door-to-door or via the telephone—seeks to sell you a product or service without a prior appointment to do so.

From 1 January 2012, all Australian consumers will be entitled to a 10-day cooling off period in relation to unsolicited sales.  During that time, a consumer can cancel an unsolicited agreement without any penalty.

However, due to a late decision by the COAG Legislative and Governance Forum on Consumer Affairs to amend the Australian Consumer Law, suppliers will be able to deliver goods up to a value of $500 as soon as an agreement is entered into. When initially drafted, the ACL prohibited the supply of goods or services, or payment for goods and services, within the 10 day cooling off period. The late change only applies to goods up to the value of $500, and the supply of services and payment for unsolicited sales will continue to be prohibited during the 10-day cooling off period.

This means that if a consumer signs an unsolicited agreement with a door-to-door salesperson to purchase a vacuum cleaner worth less than $500, the salesperson may leave the vacuum cleaner with the consumer immediately (although the salesperson cannot accept payment until the end of the cooling-off period). If the consumer invokes their right to terminate the unsolicited agreement during the cooling off period, the supplier will be obliged to collect the vacuum cleaner within 30 days or the vacuum cleaner become the consumer’s property.

In a media release announcing the changes on 31 December 2011, the Parliamentary Secretary to the Treasurer, David Bradbury, called the first year of the ACL ‘a great success’.  Consumer Action largely agrees, but we aren’t convinced these specific changes improve consumer protection. 

Here’s why.

Behavioural economics (a discipline that combines psychology and economics) tells us that even though they aren’t conscious of it, people are much more emotionally invested in a purchase if they already have possession of the goods. People value losses more than gains—that is, they will make more of an effort to avoid losing something they already have than they would to acquire the same thing initially.[1]

This is known as the endowment principle, and is a psychological tool often used in unsolicited marketing. For example, unsolicited credit card limit increase offers are framed in a way that suggests the credit already belongs to the customer, they just have to accept it—for example, the term ‘pre-approved’ is used. If you’re interested in consumer behavioural economics, check out our 2008 report Congratulations, You’re Pre-Approved! An analysis of credit limit upselling letters .

In addition, another behavioural principle called ‘consistency’ (our desire to act in a way that is consistent with our words and deeds) means that people will often be uncomfortable with the idea of retracting their agreement to a purchase during the cooling off period.

In light of what we know about consumer behaviour, we think that a consumer is far less likely to return a product within the cooling-off period when it has already been delivered to them.  For this reason, we fear that the effectiveness of cooling off periods as a consumer protection will be eroded as a result of  this amendment.

Consumer Action will be keeping a very close eye on how business change their practices in light of this amendment , and we’d love your views on whether the first changes to the ACL are beneficial. Email us at campaigns@consumeraction.org.au