Cooling-off periods are failing to protect Australian consumers from predatory sales tactics, new research has found.
Telemarketers and door-knockers are leveraging the concept of a cooling-off period to strong-arm consumers into unnecessary purchases, according to the study conducted by Deakin University on behalf of the Consumer Action Law Centre.
Report author, Dr Paul Harrison, said when test subjects were offered cooling-off periods they almost never cancelled the purchase, even when doing so might be in their best interests.
“It is definitely a conscious sales tactic and it’s built into their sales training,” Dr Harrison told The New Daily.
“Getting the person to sign on the night is the critical thing because they are less likely to change their minds.”
Cooling-off periods were intended to protect Australians from high-pressure selling. They apply for different lengths of time depending on the products involved.
The Deakin University study, published last week, examined the effectiveness of 10-day periods for unsolicited sales (usually door-knocking and telemarketing).
A spokesman for the Australian Competition and Consumer Commission (ACCC) told The New Daily that, by law, there is a set cooling-off period for all purchases over $100. The rule applies when any uninvited seller approaches a customer outside their normal place of doing business.
Consumers can change their mind and cancel the contract for any reason without penalty within 10 business days. For goods that cost $500 or less, the salesperson can supply these goods immediately during the cooling-off period, but customers still have the right to cancel the contract.
A salesperson cannot take payment during the cooling-off period for any goods or services and cannot supply any services.
“The cooling-off period provides a fundamental protection for consumers,” the ACCC spokesman said.
The Deakin University study prompted the Consumer Action Law Centre to call for the consumer law to be amended to include a ‘double opt-in’. This would require consumers to agree to the contract a second time several days after the doorstop sales pitch or telemarketer call.
Australia’s consumer law is currently under active review. The introduction of opt-in processes is among the possible changes on the table.
‘No problem to fix’: industry
A spokeswoman for unsolicited marketers warned that such changes would disadvantage consumers and further encumber an already heavily regulated industry.
Anne Whitehouse, CEO of Sales Assured, which represents face-to-face sales companies including many of the big energy providers, said callbacks would be just another barrier for consumers.
“Some consumer groups would say ‘that’s great’, but in terms of driving competition it’s telesales and door-to-door marketing that drives prices down for the consumer,” Ms Whitehouse told The New Daily.
“It is very important to have that channel working adequately and effectively.”
The high-pressure sales tactics of the past had largely been stamped out, and rogue practitioners face heavy disciplinary action, Ms Whitehouse said.
“The number of complaints that come in are 0.0004 per cent, about four in 10,000, for door-to-door sales.”
Psychology may explain why cooling-off doesn’t work
Deakin University’s Dr Harrison said his study provided some of the first concrete empirical data in support of the ‘double opt-in’ process as a viable alternative.
The rule would hand power back to the consumer by disrupting the psychological process of ‘status quo bias’, he said.
The psychological theory posits that consumers prefer for things to stay the same, even when the cost of change is small and the potential benefits are high.
This state of inaction is known as ‘inertia’, and it may be the reason people stay in crummy relationships; fail to switch mortgage providers when they could get better rates; and in this case, follow through on a non-binding commitment to pay for an item or service they don’t want or need.
“And it’s the harmful products that are most likely to be improved by an opt-in system: short-term loans, low-value financial products and insurance,” Dr Harrison said.
“It also puts pressure back on the seller to develop better products that don’t rely on predatory sales tactics.”