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Consumer protection

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Long overdue changes to the Consumer Guarantees Act and Fair Trading Act became law from 17 June 2014. The changes mean you’ll have extra protection against unfair practices and dodgy dealers.

Online auctions

What’s changed: Goods you buy at auction on sites like Trade Me will now be covered by the Consumer Guarantees Act (CGA). This means if you buy a product and it turns out to be faulty, you’re entitled to ask the trader to put things right. Traders selling online will also have to tell you they’re “in trade” so you know who you’re dealing with.

Up until now, products bought via auction or competitive tender have been excluded from the CGA. That’s been a windfall for the growing number of traders who use auction websites because they’ve been able to avoid any responsibility for faulty goods. They won’t be able to do this anymore. Just like products you buy in “bricks and mortar” stores, goods bought at auction will be covered by the Act.

See our Online auctions report for more details.

Delivery guarantee

What’s changed: When a company agrees to deliver the goods you’ve bought, it will have to make sure they get to you on time and in good condition. If you haven’t agreed on a specific delivery time, then delivery has to be within a reasonable time.

What happens if the goods don’t arrive on time? You’re entitled to claim compensation for any losses you incur as a result of the delay. You’re also entitled to reject the product and claim a refund if the failure to get the goods to you is substantial.

The CGA also makes it clear the trader has to put things right when the goods arrive damaged. They can’t just blame the courier. It’s the trader’s responsibility to provide a remedy: you don’t have to fight it out with the courier company.

See When goods arrive damaged or late for more details.

Extended warranties

What’s changed: Retailers who want to sell you an extended warranty when you buy a new fridge – or any other appliance – will now have to give you information about your legal rights to a repair, replacement or refund if the product turns out to be faulty. They’ll also have to tell you what extra benefits the extended warranty provides.

If you buy a warranty, you’ll have a “cooling-off” period of 5 working days to cancel it and get a refund. Retailers have to tell you about the cooling-off period when you’re in the store. You can give notice to cancel either orally or in writing.

Selling extended warranties has been a lucrative business for retailers. The warranties have been heavily promoted, often with confusing or misleading information about the benefits they offer. In many cases, you’re paying for protection you already have by law. Retailers will now have to tell you about your existing legal rights.

See our full extended warranties report for more details.

Door-to-door sales

What’s changed: Traders selling goods or services door-to-door will have to give you 5 working days to cancel a sale if you change your mind. The rule also applies to goods and services sold by telemarketing. This means if a company cold calls you offering a new electricity deal and you sign up, you have the right to opt out.

Door-to-door sellers and telemarketers also have to give you a written agreement which:

  • clearly describes the goods or service being supplied
  • shows the total price payable (or how the total will be calculated if it can’t be worked out at the time of signing)
  • informs you of your right to cancel
  • lists the trader’s contact details (including a street address, phone number and email) and your contact details shows the date it was signed. If the trader fails to give you this information, the agreement can’t be enforced (unless the failure is “minor” and doesn’t have a serious effect on you).

The trader also can’t enforce the agreement within the 5-day cooling-off period – which means they can’t demand payment during this time. And if they’ve supplied services in the cooling-off period, they’re not entitled to be paid for them.

We continue to get regular complaints about the high-pressure sales tactics used by door-to-door salespeople. Changes to the law will finally give consumers extra protection from these traders.

See Uninvited direct sales for more details.

Unsubstantiated claims

What’s changed: A new ban on unsubstantiated claims means companies won’t be able to make a claim about a product or service unless they have reasonable grounds for making it. This means if a trader tells you a product is “30% more energy efficient” than another, they must have good evidence to back up what they say.

The Commerce Commission will be able to prosecute companies which make claims they can't support. The commission can already prosecute traders for false and misleading claims but it first has to prove the claims aren’t true. A ban on unsubstantiated claims will be an incentive for traders to make sure their claims stack up before they make them.


What’s changed: Traders now face substantially increased penalties for breaches of the Fair Trading Act. Maximum penalties for false and misleading claims have risen from $60,000 to $200,000 for an individual and from $200,000 to $600,000 for a company.

Traders also risk being prosecuted by the Commerce Commission for failing to comply with rules relating to door-to-door sales, extended warranties and lay-by sales. Penalties for breaches are set at $10,000 for an individual and $30,000 for a company.

The commission has the option of issuing an infringement notice – without the need to go to court – where a trader hasn’t given a consumer the required information about their rights in relation to a door-to-door, extended warranty or layby sale. The maximum infringement notice fine is $2000.

Infringement notices can also be issued where an online trader falls to disclose that they’re “in trade”.

If you think a company has breached the rules, make a complaint to the commission. Let us know too.

More to come

A ban on unfair terms and conditions in consumer contracts – one of the most significant changes to the law – will come into force on 17 March 2015. Companies will have until then to amend their existing contracts to make sure they comply with the law or face the risk of being taken to court by the Commerce Commission.

The law change will mean a court can declare terms and conditions in standard-form contracts – such as contracts for electricity and telco services – to be unfair if they unreasonably favour the supplier over the consumer. The Fair Trading Act states a term is unfair if it:

  • would cause a significant imbalance in the parties' rights and obligations arising under the contract and
  • is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term and
  • would cause detriment (whether financial or otherwise) to a party if it were applied, enforced, or relied on.

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