Determinations

TDR Case Note T003591 (2009)

Issue

Early termination charges, misleading or inadequate information regarding charges for early termination, Fair Trading Act.

Background

The customer subscribed to the Scheme Member Provider (Provider) for telephone services with a 12-month contract from April 2008. In May 2008 the customer notified the provider that it was cancelling the contract due to entering into a contract with another provider. The provider required the customer to pay an early termination charge of $1,964.82 for the three phone numbers that were cancelled.

The customer claimed that the provider did not make its early termination charges clear due to an unreadable copy of the terms of agreement having been provided by fax. After becoming aware of the early termination charges the customer offered to honour the 12-month contract but the provider did not accept. The customer also claimed unreasonable early termination charges and unreasonable referral of the debt to a debt collection agency.

The provider responded that the customer signed a 12 month contract, which contained a penalty for early termination. The provider’s Standard Terms of Agreement also detailed the consequences of early termination of the contract and the customer did not offer to subscribe back to the provider until 6 months after the early termination charges were applied.

Adjudicator’s decision

The adjudicator found the essential issue was whether there had been a breach of the Fair Trading Act (Act) or the Customer Complaints Code (Code) regarding misleading conduct due to inadequate information about penalties for early termination. S 11 of the Act prohibits any person in trade from engaging in conduct which may mislead a customer as to the nature, characteristics, suitability for purpose, or quality of services. Clause 6 of the Code requires that terms and conditions must be accurate and easy for customer to obtain, and include clearly key rights and obligations of both parties.

The adjudicator found that the documentation received by the customer before entering into the contract was of poor quality but not illegible. There was no evidence showing that the customer considered the terms and conditions to be unreadable or requested a clearer copy before signing the contract. Clause 3 of the contract stated that the provider’s standard terms and conditions applied. Clauses 14.2 and 14.3 of the provider’s Standard Terms of Agreement set out penalties for early termination. The adjudicator therefore found no evidence of any breach of the Fair Trading Act 1986 regarding misleading conduct.

The adjudicator found there was no requirement for the provider to reinstate the contract when the customer had clearly cancelled. Finally, there was no evidence to show that the amount owed by the customer remained in dispute. Therefore, it was open for the provider to refer the unpaid debt to the debt collection agency.

Final outcome

The adjudicator concluded that there was no breach of the Fair Trading Act 1986 or the Code, Therefore no remedies were awarded.