Servcorp unfair contract case reminds us why rolling over is risky

Angus Kidman 18 September 2017 NEWS

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ACCC crackdown is a warning klaxon for everyone.

Last week, the Australian Competition and Consumer Commission (ACCC) announced that it was pursuing a court case against serviced office supplier Servcorp for allegedly unfair contract terms in its dealings with small businesses.

You might not be planning on renting a serviced office any time soon, but the case highlights contract issues that affect every Australian.

New laws aimed at eliminating small business contract terms came into force in November 2016, but unfair practices continue. In March this year, ACCC deputy chair, Dr Michael Schaper, noted that the ACCC had received 48 complaints about contract issues since the new legislation took effect. So now, as well as continuing education on the issue, the regulator is taking to the courts.

The ACCC says that Servcorp's contract terms mean that it can change prices and impose penalties without notice. It says that under some contracts Servcorp can do the following:

  • automatically renew a customer's contract and increase prices without prior notice
  • unilaterally terminate the contract and impose penalties having done so
  • unilaterally determine whether the contract has been breached

Servcorp intends to defend the action. "[Servcorp] maintains that its serviced office agreements are negotiable contracts and do not constitute standard-form contracts regulated by the unfair contract terms regime under the Australian Consumer Law," company secretary, Greg Pearce, said in a statement to the ASX.

Whatever the outcome of the court case, there's an important lesson here: if you've taken any kind of service on a contract, don't just "roll it over" and continue on the same deal once the contract term has expired. That's a recipe for spending too much. It might seem convenient/lazy, but it will rarely pay off.

Mobile phone plans provide a telling example. Over the past two years, we've seen data allowances increase massively across all providers. If you just stick with the same deal you signed up for two years ago, you're not getting the advantage of that.

Energy bills are equally risky. Once your contract expires, you may well move onto your provider's standing offer, which is unlikely to offer any discounts.

So don't be a contract slob. When you sign up for a service on a contract, put a note in your calendar for one month before the contract expires to review your options at that point. Odds are that sticking with what you've got won't be the best deal.

Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears regularly on finder.com.au.

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