Australia: Consumers to receive refund after ASIC accepts enforceable undertaking from solar panel provider

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% interest".

ASIC's investigation

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:

• providing credit;
• 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.

Key takeaway

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.

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