Explicit Informed Consent: What does it actually mean?

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Explicit informed consent is a ubiquitous term in the energy industry and is found in the national energy retail rules as well as in the Victorian energy law. The penalties for a retailer failing to obtain explicit informed consent can be significant, but what does the term actually mean?

Explicit informed consent is a key protection and it is critical to ensuring that customers are confident engaging in the energy market,”…The AER takes any failure by retailers to meet this obligation very seriously, and will take enforcement action in appropriate cases.” – AER Board Member Jim Cox.

The consequences of non-compliance

The Australian Energy Regulator (AER) has taken action against energy retailers who failed to obtain EIC.

“In 2015, the Federal Court ordered by consent that EnergyAustralia Pty Ltd (EnergyAustralia) pay penalties of $500 000 for failing to obtain the explicit informed consent of customers.

In separate concurrent proceedings brought by the ACCC, the Federal Court imposed penalties of $1 million on EnergyAustralia and $100,000 on its telemarketing agent Bright Choice, after finding that they had made false or misleading representations to consumers.

In 2017, Simply Energy paid penalties of $60 000 for failing to obtain explicit informed consent before entering customers into new contracts. Simply Energy previously paid penalties of $80 000 in 2015 in relation to alleged breaches of the explicit informed consent obligations in 2014.”

– Source: https://www.aer.gov.au/news-release/simply-energy-fined-60000-for-alleged-failure-to-obtain-consent-before-switching-customers

What is needed for explicit informed consent?

There are three critical components of explicit informed consent. These are:

  1. Component 1: Consent must be informed: to be informed there must be a two-way discussion between a business and a customer in a way that is balanced and transparent.  Information provided to customers must be current, complete, and presented without jargon and in plain simple English;
  2. Component 2: Consent must be voluntary: the customer must be given a genuine opportunity to provide or withhold their consent. The customer must be free from pressure, undue influence or duress.
  3. Component 3: the customer must have the capacity to provide consent. To have the required level of capacity, the customer must be able to understand and use the information presented to make an informed decision. This means that any disability that may impact on a person’s capacity to provide consent must be considered and communication must be tailored accordingly.

Where are the Danger Zones?

Danger zones refer to circumstances which may give rise to a breach. Looking at each of the components of explicit informed consent in turn, the danger zones are:

  1. Ensuring that a customer is always given an opportunity to ask questions and that information provided to a customer is complete. i.e. presenting only the positives of a particular product without disclosing fees could be a breach of the requirement to obtain explicit informed consent, as could a sign- up process that does not allow a customer to ask questions.
  2. Ensuring that customers are given an opportunity to say no. This is particularly important when using third-party sales agents who are incentivised by commission payments.
  3. Ensuring that a retailer assesses the capacity of a customer to provide informed consent and that information is provided in a way that ensure that this is the case. i.e. where a customer does not speak English, information must be provided in their language to ensure that consent can be obtained.

If you have any questions on the above please get in touch.

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