A vehicle for unfair terms?

The ACCC has instituted proceedings in the Federal Court against CLA Trading Pty Ltd, trading as Europcar Australia (Europcar), alleging that the following terms in Europcar’s standard vehicle rental contracts are unfair and should be declared void:

• terms requiring consumers to pay Europcar a “Damage Liability Fee” (up to $3,650) if the rental vehicle is damaged or stolen, or if there is third party loss, irrespective of fault; and
• terms making the consumer fully liable to Europcar if the rental vehicle is damaged or stolen, or if there is third party loss, where a consumer breaches the rental contract, no matter how trivial the breach and regardless of whether the breach caused the damage or loss.

Under the Australian Consumer Law (ACL), a court may determine that a term of a standard form consumer contract is unfair. A term is “unfair” if it would cause a significant imbalance in the parties’ rights and obligations under the contract, it is not reasonably necessary to protect the legitimate interests of the advantaged party and it would cause detriment to a party if applied or relied upon. The ACCC is concerned that Europcar’s standard contract terms can impose unlimited liability on consumers in certain situations.

The ACCC highlights that vehicle rental contracts are complex and often entered into in time-sensitive situations, such as airport departures, so consumers have little time to properly assess their rights and obligations or to negotiate.

The ACCC also alleges that Europcar engaged in misleading or deceptive conduct and made false or misleading representations on its website regarding the maximum amount that a customer would be liable for if there was loss or damage to the rental vehicle or third party loss. The ACCC claims that these representations were misleading because, in addition to the amounts specified on the website, a customer was also liable for loss or damage to an unlimited amount in some circumstances.

The ACCC is seeking declarations, injunctions, pecuniary penalties, orders for the publication of corrective notices and compliance program orders. The Directions Hearing is listed for 5 February 2015 in the Federal Court in Perth.

These proceedings come over a year after the ACCC released its report Unfair Contract Terms – Industry Review Outcomes, blogged about here. The report was delivered after the ACCC conducted an investigation of standard form consumer contracts in a number of industries, including vehicle rental. Importantly, both vehicle rental companies approached by the ACCC declined to amend or delete the problematic terms identified. The report warned that these ACL issues would be pursued going forward by the ACCC and enforcement action would be taken if warranted.

Since the release of this report, the ACCC has so far taken enforcement action against Bytecard Pty Ltd for unfair contract terms, which were declared by consent to be void.

The ACCC has identified the use of unfair contract terms as one if its enforcement priorities in 2014 in its Compliance and Enforcement Policy (see our alert on the 2014 priorities here).

In keeping with its public promise to extend unfair contract term protections to small businesses (blogged about here), the Federal Government recently completed a consultation process of the proposed extension in September 2014.  However, no results or commitments have since been provided, even though the Government set aside funds in this year’s Budget to roll out the extension.

Photo credit: Cyberesque / Flickr