ASIC has recently accepted an enforceable undertaking from
Simply Energy Solutions Pty Ltd (SES) in relation
to its sale of solar panel systems to consumers in Victoria and
South Australia, demonstrating the importance for businesses to
proceed with care when their terms of sale might involve engagement
in a credit activity.
SES terms of sale
Between February 2014 and April 2015, SES marketed and sold
solar panel systems that customers could either pay for up front or
via a five-year instalment plan. SES and the consumer would enter
into a contract for the sale and installation of a residential
solar system (Sale Agreement). The price under the Sale Agreement
was the same whether the consumer paid up front or by instalments.
However, in setting the price, SES built in an amount which was
over and above the cash price for the goods.
That amount was, in essence, an allowance for the cost of
capital over the term of the Sale Agreement plus and a margin on
that cost of capital. As a result, the price of the solar systems
offered by SES was higher than the price at which other suppliers
offered the solar systems to retail customers. Despite this, SES
promoted the terms of the Sale Agreement as "0%
The National Consumer Credit Protection Act 2009 (Cth)
(National Credit Act) provides that where a person
offers goods for sale by instalment payments and the amount payable
by instalments exceeds the cash price of goods, the person may be
engaging in credit activities. Those engaging in credit activities
are required to hold an Australian Credit Licence
(Licence) issued by ASIC.
When new management arrived at SES in 2015, a review of the
company's terms of sale prompted SES to proactively raise with
ASIC its concerns that it may have been operating in breach of the
National Credit Act. ASIC then commenced an investigation.
What did ASIC decide?
In ASIC's view, each Sale Agreement entered into was to be
properly construed as:
a sale of goods by instalment; and
a credit contract.
Therefore, by entering into a Sale Agreement where a consumer
elected to pay by instalments, SES was:
acting as a credit provider; and
engaging in credit activity,
without a Licence.
Further SES's Sale Agreement did not include the relevant
disclosures required under the National Credit Act.
To rectify the situation, ASIC has accepted an enforceable
undertaking which requires SES to:
reduce the amount payable under the Sale Agreement to the
market value of the solar panel system;
refund any amount already paid by a customer which is in excess
of the reduced price together with interest;
allow the customer to continue to pay the market value of the
solar panel systems by way of instalments; and
provide training to its employees and officers on compliance
with the National Credit Act and Regulations.
Businesses need to be aware that where they sell goods on
payment terms to individual consumers, they need to carefully
consider whether there is a cost of credit built into the price.
Where there is, they must consider the application of the National
Credit Act and Regulations or think about partnering with a
licensed credit provider.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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