The New Energy Tech Consumer Code & The Battle To Purge ‘Interest Free Deals’ From Solar

There’s a new solar code of conduct on the horizon, and Buy Now, Pay Later (BNPL) credit providers are not happy with it.

The ‘CEC Approved Solar Retailer’ (ASR) scheme, a code of conduct for solar companies, may soon be obsolete. I think that’s a good thing.

What started as an excellent voluntary code soon descended in to farce as the CEC successfully worked with the Victorian Government to make it ‘de facto mandatory’ in Victoria¹.

There are multiple examples of terrible companies who were accepted as Approved Solar Retailers, and the dastardly things they got up to before and after joining the CEC’s “Best of The Best”. But, let’s not dwell on the past.  The battle has been won. The CEC Approved Solar Retailer scheme will soon be as pointless as a 25 year warranty from True Value Solar.

Or as Brian Blessed would say:

“as useless as the Pope’s balls!”

That’s because there is a new code of conduct for solar retailers² in the wings: The New Energy Tech Code Of Conduct (NETCC).

This new code – assuming it gets final approval from the ACCC –  is likely to see the Approved Solar Retailer Scheme shrink or even disappear. The ‘Approved Solar Retailer’ badge already means very little: the bar has been lowered so much Warwick Davis could straddle it. The only reason I can see to sign up these days is to access various state schemes that insist on participating companies being Approved Solar Retailers.

The new code of conduct will become a (hopefully) cheaper, simpler alternative. And if that’s not enough to get retailers ditching the ASR scheme en masse, then another factor could. If – as many people hope – the new code is not administered by the CEC³ that will be a very compelling reason to switch. The CEC has some vocal opponents in the solar installer community these days. The fact that they won’t let paid-up installers vote is just one reason they are angry. Their power over the industry is also verging on monopolistic, so it will be great to see them let go of one part of the solar industry at least.

A new code of conduct will also reduce consumer confusion. If I had a dollar for every time a consumer contacted SolarQuotes confusing:

‘CEC Accredited Solar Installers’

and

‘CEC Approved Solar Retailers’⁴,

I’d be able to keep Ronald in chocolate for at least a week.

It should be much easier to realise that:

‘New Energy Tech Code of Conduct Retailers’

are not the same thing as

‘CEC Accredited Solar Installers’.

A brief history of the New Energy Tech Consumer Code

In 2017, the COAG Energy Council⁵ requested a Code of Conduct be developed for the sale and installation of all distributed energy products such as solar power systems, solar batteries plus energy management devices and software.

A working group was set up and workshops were run around the country to get input from the industry and the public. I wasted most of a day at one. All my suggestions were ignored.

A code was written and on 30 April 2019, the Clean Energy Council, the Australian Energy Council, the Smart Energy Council and Energy Consumers Australia submitted a draft code of conduct to the ACCC for authorisation.

The code needs ACCC authorisation because the code effectively sees rival businesses agree on the manner in which they will compete in the market. This causes a number of potential contraventions of the Competition and Consumer Act 2010 (Cth).

After consideration, the ACCC concluded that the public detriment that may be caused by a lessening of consumer choice was likely to be outweighed by the public benefits of the Code.

The Draft Code was put out for 2 weeks of public submissions on 8 May 2019. Ronald put it a good written submission on behalf of SolarQuotes. It appears to have been totally ignored. Ho hum.

But Ronald is not the only one who cares about the code. The ACCC received another 24 submissions. Here’s a summary of who submitted and what they were concerned about:

• Consumer Action Law Centre : Were keen for Buy Now Pay later (BNPL) to be excluded from sales of solar power and other new energy tech, based on their experience of it being mis-sold to vulnerable people, and the fact BNPL vendors avoid the government regulation other financial product vendors must abide by – essentially due to a legal loophole that I’ll go into later.
• Ralph de Lautour – a solar installer and business owner: against the CEC being administrators of the new code – based on his experience of the Clean Energy Council controlling other aspects of the solar industry.
• An anonymous interested party:  against the CEC being administrators of the new code.
• FlexiGroup: A big player in BNPL in the solar space. They have the brands Certegy and Humm and were strongly opposed to any restrictions on selling solar power with their ‘no interest ever’ BNPL products.
• Neal Nugent Electrical + Solar: Against the CEC being administrators of the new code
• CHOICE & 8 other consumer advocacy groups: Asked for a ban on unsolicited sales of solar – for example door knocking, accosting people in shopping centres, cold calling etc.
• Solar Naturally: Against the CEC being administrators of the new code. Also against any restrictions on offering BNPL.
• Uniting Vic. Tas: Asking for lots of general consumer protection stuff.
• Dept. Energy and Mining  (South Australian Government Department): They want to ensure ‘all necessary information is provided to customers to assist with sound decision- making.’  Which is ironic as the opacity and misleading advertising they are using to flog their SA Home Battery Scheme is – in my opinion – a shining example of how to sell batteries unethically.
• Waztec Services / Capricorn solar: Against the CEC being administrators of the new code.
• Brighte – A newish, but fast growing BNPL vendor (think of them as offering similar products to Flexigroup but with a nicer image⁶ ): Against restrictions on BNPL schemes.
• Energy Australia: Didn’t want to be held to a minimum warranty on the operation and performance of the systems they sell. Didn’t want to be told how to handle complaints. Do not want to be beholden to the privacy requirements of the code. Note to self: a great reason to never give any personal information to EA!
• AGL: They actually made a good point. There is a clause in the code whereby government schemes are specifically excluded from the finance protections. AGL, very reasonably, thought this was silly. I agree. What is it with us Aussies letting the government hold themselves to a different set of rules? AGL were also not happy that the Administrator of the code could make up binding standards as they went along. Shock horror: for once I actually agreed with what AGL had to say about something!
• Energy & Water Ombudsman Queensland:  Said the timeframe for acknowledging complaints should be quantified (ASAP not good enough). Also – education of consumers must be widely disseminated. Hey, I know a very popular website that can do that for free!
• SolarQuotes: Don’t let vendors only quote blended payback on batteries. Make sure there are no advantages given to signatories by governments.
• Tesla Motors Australia: Please don’t include EV chargers in the code. Please separate the responsibilities of the solar company and the VPP operator where they are different companies. How do we interpret this code as a vertically integrated company that manufactures the solar and batteries as well as install and sell them? Oh, and how much is this scheme actually gonna cost signatories? Good question Tesla!
• Joe McMahon – solar installer: Against the CEC being administrators of the new code.
• Michael Berris – solar designer: Against the CEC being administrators of the new code.
• Matthew Richens – solar installer: Against the CEC being administrators of the new code.
• Origin Energy: – Customers who wish to self connect to the network should accept responsibility for doing so. Secondly, a potential requirement of government tenders to specify only Code signatories is unlikely to reduce competition. My response: Origin full of BS as usual.
• DMS Energy  – solar installer: Against the CEC being administrators of the new code.
• Stephen Breheny – solar installer: Please can we mandate the colour coding of solar and battery Circuit Breakers in the switchboard?

Which submissions were not ignored?

Looking at the correspondence published between the ACCC and the Clean Energy Council, as far as I can see, only 2 issues raised in the public consultation were looked at seriously:

1. Requests that the administrator of the code not be the CEC. Nine submissions asked for this.
2. Exclusion of Buy Now Pay Later (BNPL) schemes which are often sold as ‘Interest Free Deals’. The BNPL vendors were upset that the Code Of Conduct effectively prevents them offering these ‘deals’ when selling solar power and battery systems. Others (including the Consumer Action Law Centre) were very supportive of excluding BNPL. There were 2 submissions against BNPL (although one was from 9 separate organisations), and 3 submissions for BNPL to stay.

In response to issue 1, the CEC sent the ACCC a 10 page letter with a big fancy flow diagram and lots of talk of audits and process.  If you ask me, the CEC have missed the point. The point argued by many submissions is not that the CEC don’t have processes for dealing with this stuff. It’s that they see the CEC as a monopoly – with all the problems and temptations that brings – and that, at least anecdotally, the Approved Solar Retailer scheme doesn’t appear to have materially improved the problem with crap solar and crap retailers.

The ACCC took  3 months to read all the submissions and the CEC’s response⁷, and on 1 August 2019 the ACCC released its Draft Determination. They proposed that a slightly amended code should be authorised and invited submissions on the amended code.

What amendments did the ACCC make to the code?

1. You can’t use BNPL if the sale is unsolicited

To be specific, Paragraph 3d was added:

“3d [you shall] make no unsolicited offers of payment arrangements not regulated by the National Consumer Credit Protection Act (2009) (Cth) (“NCCPA”)”

“payment arrangements not regulated by the National Consumer Credit Protection Act” translates into: most Buy Now Pay Later schemes.

So instead of the requested outright ban on all unsolicited sales, they have proposed ban on selling solar (and other energy stuff) with BNPL if the sale is unsolicited.

I’d prefer an outright ban on unsolicited sales – although I can see that is unrealistic (and possibly a bit too ‘Big Government’). So this is an OK compromise.

Most of the absolute horror stories we see – such as the old lady with early stage dementia being sold solar she didn’t need (she already had solar panels) with repayments she couldn’t afford seem to combine unsolicited door knocking with BNPL.

2. You can use BNPL for solicited sales (with conditions)

The authors of the code backed down from their initial position of effectively excluding BNPL from solar and battery sales.

The amended code says the BNPL credit provider must adhere to a ‘BNPL Code of Conduct’ And that code of conduct must be:

“verified by the Administrator, in consultation with the Industry Council, as delivering substantively equivalent consumer protections [as the code that traditional finance providers have to follow]”

Which is a way of making sure that any ‘BNPL Code of Conduct’ actually has teeth and really does hold the BNPL credit provider and solar vendor to the same high standards as a ‘real’ financial services provider. That’s important if the BNPL industry will be writing their own code of conduct!

3. If a company’s application to join the Code of Conduct is refused – they can appeal.

This appears to be in response to a joint oral submission from Arise Solar and Sunboost during an ACCC ‘pre-decision conference’.

Paragraph A6 has been added:

“A6 Where an applicant is refused admittance or renewal as a Signatory, the Applicant has a right to appeal the Administrator’s decision to the Panel (a fee may be payable by the Applicant).”

Fair enough. It’s hard to argue with giving people a right of appeal.

Why did the ACCC propose the amended code?

In terms of the public benefits of the code, the ACCC said that the code should not lessen competition and will benefit consumers – so they are all for it :

“The ACCC considers that compliance with the Consumer Code will result in public benefits by improving the business practices of signatory retailers and the level of consumer protection provided. This will assist consumers of New Energy Tech to make better informed purchasing decisions in a complex industry and reduce the risk of consumer harm, including from unscrupulous business practices.

 

The Consumer Code is unlikely to lessen competition between suppliers of New Energy Tech products or services; the Consumer Code will limit certain practices that are not in the best interests of consumers, but does not prevent vigorous competition to win customers by offering attractive products and services at competitive prices.”

ACCC response to concerns about the CEC administering the code

In terms of worries the Clean Energy Council would end up as the administrator of the new code, the ACCC said there would be a Council charged with appointing the Code Administrators, and that the members of this Council were yet to be appointed.

“A number of submissions expressed views about who should or should not be appointed as Code Administrator. The ACCC expresses no view on the concerns raised in these submissions but notes it will be open to Council members to consider these submissions when deciding who to appoint as Code Administrator.”

ACCC response to BNPL finance

In terms of the exclusion of BNPL, the ACCC was happy with the watering down of the BNPL clause – allowing BNPL vendors to sell solar if they followed their own vetted, strict code of conduct.

But the Consumer Action Law Centre were not happy. They said the BNPL code of conduct would be a watered down version of the strict rules that properly regulated finance providers had to adhere to:

“the ACCC have taken a convoluted path as they require only select clauses from the NCCPA to apply to unregulated finance providers. While this approach may improve protections and outcomes for customers of code signatories, it also presents a number of challenges. Firstly, the clauses are very limited when compared to of the complete legislation and regulation that provide protections to consumers in the NCCPA and NCC. Secondly, this approach places significant strain on the NETCC Code Administrator who will have very limited enforcement powers to ensure compliance with finance issues, let alone assessing which financial providers meet the specified requirements when their expertise should instead be focused on new energy technology.”

ACCC invited submissions on the amended code

So now the amended code had been tentatively approved by the ACCC in what they call a ‘draft decision’, they put the amended code out for another lot of submissions.

“The ACCC invites further submissions on whether it is feasible and desirable to modify these provisions of the Consumer Code to permit finance arrangements that fall under other regulatory regimes if they can be demonstrated to provide equivalent consumer safeguards to those in the NCCPA and NCC.”

And oh boy, did the industry take up the offer to submit. Here’s a brief summary of the submissions that came in to the amended code. They arrived from 6th August – 8th November 2019.

• RateSetter Australia  (a regulated finance provider):  An anti-BNPL submission. Strongly against the amendments. They want BNPL excluded outright.
• Australian Financial Complaints Authority:  They seemed to be cool with the amendments to the BNPL clauses.
  • “AFCA supports the inclusion in the Tech Code of provisions which seek to ensure that consumers who finance the acquisition of energy tech products under BNPL arrangements have access to substantively equivalent protections to those provided under the NCCPA and NCC”.
• Payright: A  BNPL vendor – pro BNPL and wants further changes to water down the BNPL clause.
• Flexigroup: A BNPL vendor – pro BNPL, wants as few restrictions as possible on BNPL.
• Australian Finance Industry Association:  pro BNPL.
• Brighte: BNPL vendor – want to remove the restrictions on BNPL products.
• Consumer Action Law Centre: – Anti BNPL – asking for original clauses to be reinstated excluding BNPL.
• ERM Power: Please include Demand response (a bit late to the party guys!).
• Genpac Energy:  Anti BNPL.
• Energy Consumers Australia: 2 pages of absolute waffle – I have no idea what their position is on anything.
• Sunboost and Arise Solar:  lots of stuff covered re: the code application process – but also pro BNPL.
• GMD Finance: traditional finance providers – anti BNPL.
• Atlas Investments: anti BNPL.
• Energy Efficient Finance: anti BNPL.
• Clean Power Australia: pro BNPL.
• Solar Naturally: pro BNPL.
• Power Ideas: pro BNPL.
• Grand Group: pro BNPL.
• Uniting Vic. Tas:  no specific mention of BNPL – wants stricter finance rules though.
• DMS Energy: Pointing out that the CEC is advertising for the position of a NETCC administrator already. Commenting that it looks like the CEC have assumed they will be the new code administrator despite the ACCC’s reassurances that the administrator has yet to be determined.

In terms of BNPL there were 9 submissions asking to remove the restrictions on BNPL and 6 submissions asking to increase the restrictions on BNPL.

Summary of changes made after the second round of submissions were considered

1. A newly amended Code was conditionally approved by the ACCC on 5 December 2019. The main change I can see a modification of the BNPL clause again. This time they are not insisting that BNPL’s own Code of Conduct is approved by the NETCC Administrator – but have instead specified a long list of what the separate BNPL code must enforce.
2. The ban on BNPL for unsolicited sales stays.
3. The right of appeal if your application to join the code is knocked back stays.

And with those changes, the ACCC authorised the NETCC in its ‘Final Determination‘ on the 5th December 2019.

The NETCC was due to go live on 31 December 2019.

BNPL provider Flexigroup appeals

But at the stroke of midnight on 30th Dec 2019 (OK, OK it was a few hours before midnight – but I’m trying to create drama here) Flexigroup⁸ lodged an appeal to the ACCC’s decision.

Essentially this means that the introduction of the new code of conduct is delayed. My guess is that the delay will be 6 months to 1 year.

And it means the CEC Approved Solar Retailer scheme has a stay of execution⁹.

Here’s a summary of Flexigroup’s appeal – as far as I can interpret the legalese anyway:

• they want vendors to be able to make unsolicited sales with BNPL.
• they want to be able to write their own code of conduct and not have to have it approved by the NETCC Administrator or need for it to comply with prescribed sections of the National Consumer Credit Protection Act.

So according to my interpretation, Flexigroup:

• Want their merchants to still be able to knock on your door (or approach you in a shopping centre etc.) and sell you a solar power and/or battery system on a weekly payment plan.
• They want the BNPL industry to be able to write and approve their own code of conduct for selling BNPL.

My opinion on BNPL

Personally, I’d be happy to see BNPL excluded from solar and battery sales altogether. We have just seen too many horror stories of vulnerable people being ripped off. The combination of BNPL, commissioned salespeople and unsolicited sales is just asking for trouble in my experience.

And I believe BNPL in the solar industry is built on 2 very questionable claims:

Questionable Claim #1: You don’t pay more for BNPL.

BNPL credit providers claim that offering BNPL is ‘a cost of doing business’ for the solar seller. So, they claim it does not add anything to the price of the solar or battery system.

The reality is very different. Although BNPL fees vary – from what I’ve seen – typically 25% is added to the cost of a solar system if it is sold with BNPL.

But BNPL companies claim you can buy solar with BNPL for the same price as if you were paying cash. Absolute BS!

“Aha!” Say the BNPL spruikers: “We explicitly prohibit our vendors (your solar company) from charging more for a system with BNPL -so the cash sales and BNPL sales have to be the same advertised price.”

So, if you ever deal with a solar provider that uses BNPL – if they are following the rules – you should be able to negotiate a ‘cash price’ about 25% lower than advertised. But doesn’t that make a mockery of the claim that punters pay the same for BNPL and cash sales?

The truth is: If the vendor offers BNPL on a solar power system, only a sucker pays the advertised price with cash.

But, in my experience some solar vendors simply ignore the rules. I’ve heard examples of solar companies adding 25% or so to advertised prices if people want BNPL. This practice is called ‘illegal price inflation’.

Why do BNPL credit providers order their merchants to advertise the same price for cash and BNPL? Because if the BNPL credit provider can claim that there ‘is no cost of finance’ it means that BNPL is not a financial product and it does not have to be regulated by the National Credit Code (NCC).

In my opinion BNPL is an industry built on a big fat deception that goes round in a self justifying circle:

If BNPL products are not regulated by the NCC the vendor has no obligation to disclose how much it is really costing to provide that ‘interest free deal’. That’s how they can claim that you won’t pay more for their products and not be regulated by the NCC.

Questionable Claim  #2  BNPL is good value and cheaper than traditional finance.

We’ve just learned that merchants have to add about 25% to the price of a system to cover BNPL. If you get a good value, transparent traditional loan and add up all the interest and charges – it is possible to pay less, sometimes much less for that finance.

And if you get a traditional loan, at least you’ll know what you are paying for the privilege of ‘finance’. You’ll have to jump through more approval hoops – but those hoops are there to protect consumers from loans they can’t afford.

Tales of woe

The most harrowing tales I’ve come across in the solar energy industry all have a common denominator: BNPL and unsolicited sales. An old person gets door knocked. The salesperson bamboozles them with numbers – often comparing their electricity bill (per quarter) with a weekly repayment. The person, keen to cut electricity costs, has to make the payments from their pension that they cannot afford. Misery ensues.

I think we should keep the ban on BNPL for unsolicited sales of solar.

If the ACCC caves in and the paragraph prohibiting unsolicited sales with BNPL is removed I can see more old people getting door knocked by salesmen wielding questionable BNPL offers. The paragraph should stay.

I can live with BNPL vendors following their own code of conduct.

In a perfect world, BNPL credit providers should not be able to write their own code of conduct – that’s just common sense. But in the interest of banning unsolicited sales with BNPL, personally I’d be happy to give the BNPL dog that bone.

So I say keep the unsolicited BNPL ban. Please stick up for vulnerable consumers Competition Tribunal! If you have to compromise on the BNPL code of conduct – that’s OK. At the end of the day, you can count the number of consumers who are going to read it with the fingers of Captain Hook’s right hand. In the real world you’ll get very few consumer complaints for anything other than really obvious breaches.

Last minute update: The BNPL industry released their draft Code Of Conduct last week. You can read it here. The best part of it is that it says they can’t bankrupt someone. That’s a good start!

The future of the New Energy Tech Consumer Code

Once the Competition Tribunal decides on Flexigroup’s appeal – the NETCC will be unleashed on the industry. Hopefully before 2021.

It is a voluntary code – but is likely to be de facto mandatory in any states or territories with their own rebates for solar or batteries.

• I predict most CEC Approved Solar Retailers will migrate to the NETCC.
• I hope that the Administrator of the Code is not the CEC.
• I hope that the ban on unsolicited BNPL sales is kept.

At the end of the day the Code is a long way from perfect. They have effectively ignored a lot of submissions. But it has to be better than the confusing, costly and damaging Approved Solar Retailer scheme.

So, as long as the unsolicited BNPL ban stays,  it’s a cautious thumbs up from me.

—-

Disclosure: If SolarQuotes users explicitly ask to talk to someone about finance we refer them, with their permission, to a finance broker called Parker Lane. We do that because we wanted, where possible, to offer a cheaper alternative to BNPL for people buying solar power systems on credit. I have been accused of being anti-BNPL because of this relationship with Parker Lane. My accusers put the cart before the horse. I promote only properly regulated finance because I dislike BNPL. Not the other way around.

I have been approached by a number of BNPL credit providers to help promote their services – but have knocked them back every time.