A Queensland report into proposed ‘lemon laws’ has recommended amending the Australian Consumer Law to establish nationally consistent laws applicable to new ‘lemon’ motor vehicles.

Late last year the Legal Affairs and Community Safety Committee presented its report, “Lemon Laws – Inquiry into consumer protections and remedies for buyers of new motor vehicles”, to the Queensland Parliament.”

The report is in response to the Queensland Parliament’s request to enquire into and report on whether there is a need to improve the consumer protections and remedies for buyers of new motor vehicles with numerous, severe defects that reoccur despite multiple repair attempts or where defects have caused a new motor vehicle to be out of service for a prolonged period of time. Such a vehicle has been referred to as a ‘lemon’.

The report followed an extensive consultation period in which AADA provided a submission to the Committee on 8 October 2015. This submission is available to read on the AADA website. Additionally, AADA CEO, Bruce McDonald, presented to the Committee at a Parliamentary hearing on 28 October.

Data made available to the Committee indicated that there were 118 responses to the Government’s 2015 invitation to consumers to share their ‘lemon experiences’. Data about complaints made to the Office of Fair Trading (OFT) suggests that that while complaints about motor vehicles are consistently one of the five subjects of all complaints lodged by consumers with the OFT over the last four years, complaints about ‘lemons’ represent less than one percent of those*.

The Committee noted that while there was insufficient evidence presented to enable it to draw a conclusion that ‘lemons’ are a prevalent issue, what is very clear is that, where a consumer has purchased what they perceive is a lemon, it is of great individual significance to that individual, with significant health and financial costs. Further, the Committee found there is risk that cars perceived to be lemons are often on-sold, and where the defects are a safety issue, unsuspecting purchasers of those vehicles and other road users could be at risk.

In its final report, the Committee made nine recommendations. Primarily the Commonwealth Government should consider the need for a national set of ‘lemon’ laws in the Australia Consumer Law Review to be conducted in 2016. This would create a nationally consistent approach to ‘lemon’ laws.

As part of this nationally consistent ‘lemon’ law, clear and practical definitions and provisions applicable to new ‘lemon’ motor vehicles must be developed in respect to mandatory time and repair limits, clarity as to when a supplier/manufacturer must repair, refund or replace a motor vehicle and an adequate definition of what constitutes a ‘lemon’ motor vehicle.

Furthermore, the Committee recommended the government consider appointing independent assessors, with investigative powers and specialised knowledge in relation to motor vehicle disputes, to deal with the issues of how consumers prove that they meet the ‘lemon’ motor vehicle threshold criteria. This would be an alternative to consumers initiating Queensland Civil and Administrative Tribunal (QCAT) and/or court proceedings.

Additionally, the Committee made recommendations that, for matters involving new motor vehicles with major defects, the government change the Queensland Civil and Administrative Tribunal (QCAT) jurisdictional limit of $25,000. Government Committee members recommend the limit be removed, so no cap applies. Non-government Committee members recommend the limit be increased to $40,000.

Cooling-off periods for new motor vehicle purchases are also to be reviewed, with consideration as to whether such periods should be unable to be waived by the purchaser and whether disadvantaged persons should receive the benefit of a longer period.

Finally, the Committee recommended the State and Commonwealth Governments implement business and consumer awareness programs, with the intention of educating industry and consumers on the intent of the Australian Consumer Law, including the consumer guarantees.

The full list of recommendations

Recommendation 1:

The committee recommends the government consider the contents of the committee’s report, particularly the committee’s recommendations, as part of the government’s consideration of issues relating to, and its participation in, the Australian Consumer Law Review 2016.

Recommendation 2:

The committee recommends the government bring the committee’s report, particularly the committee’s recommendations, to the attention of Consumer Affairs Australia and New Zealand (CAANZ) and the government bodies, State and Territory regulators and other entities comprising CAANZ, such that the committee’s report may inform the Australian Consumer Law Review 2016.

Recommendation 3:

The committee recommends that the government appropriately amend existing Queensland legislation to ensure effective implementation of the committee’s recommendations included in this report, but do so as part of any national approach to ‘lemon’ laws for new motor vehicles in Australia.

Recommendation 4:

The committee recommends that the appropriate mechanism to ensure a national approach to changes in existing ‘lemon’ motor vehicle laws is to amend the Australian Consumer Law such that it specifically sets out nationally consistent laws applicable to new ‘lemon’ motor vehicles.

Recommendation 5:

The committee recommends the incorporation of clear and practical definitions and provisions into any nationally consistent laws applicable to new ‘lemon’ motor vehicles, including:

• mandatory time and repair limits, such as imposing limits on the number of times a supplier/manufacturer can attempt to repair a defect in a motor vehicle and the number of days the vehicle can be ‘off the road’, before a buyer must be offered a refund or replacement
• clarity as to when a supplier/manufacturer must repair, refund or replace a motor vehicle
• an adequate definition of what constitutes a ‘lemon’ motor vehicle, such as –
  – adequate definitions of ‘acceptable quality’ and ‘fit for purpose’
  – clarity as to the distinction between major and minor defects, and
  – clarity as to the distinction between a ‘lemon’ and generic design manufacturing defects (requiring general recall) or serious design safety defects (requiring urgent attention).

Recommendation 6:

The committee recommends the Government consider appointing independent assessors, with investigative powers and specialised knowledge in relation to motor vehicle disputes, to deal with the issues of how consumers prove that they meet the ‘lemon’ motor vehicle threshold criteria (when established – see Recommendation 5), as an alternative to consumers initiating Queensland Civil and Administrative Tribunal (QCAT) and/or court proceedings.

Recommendation 7:

The committee recommends the government change the Queensland Civil and Administrative Tribunal (QCAT) jurisdictional limit of $25,000, for matters involving new motor vehicles with major defects. Government committee members recommend the limit be removed, so no cap applies. Non-government committee members recommend the limit be increased to $40,000.

Recommendation 8:

The committee recommends the State and Commonwealth Governments implement business and consumer awareness programs, with the intention of educating industry and consumers on the intent of the Australian Consumer Law, including the consumer guarantees.

Recommendation 9:

The committee recommends the Government review cooling-off periods for new motor vehicle purchases, with consideration as to whether such periods should be unable to be waived by the purchaser and whether disadvantaged persons should receive the benefit of a longer period.

* JAG, Analysis of OFT data, Material prepared for the Legal Affairs and Community Safety Committee, September 2015, p4