Blue Jackie: Consumer Guarantees Amendment Bill — First Reading 
Blue Jackie: Consumer Guarantees Amendment Bill — First Reading 
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Dr JACKIE BLUE (National) 
: 
 I move  
That the Consumer Guarantees Amendment Bill be now read a first time. 
 This bill amends the Consumer Guarantees Act 1993 to improve its operation in two areas: firstly extended warranties and secondly the supply of goods and services by suppliers through a competitive bidding process that uses an online trading facility. At the appropriate time I will be requesting that this bill is referred to the Commerce Committee. 
I first acknowledge the support and assistance I received from James Ryan an adviser in the Ministry of Consumer Affairs. James is a passionate advocate for consumer rights and in particular for the two aspects of this amendment bill. James was a driving force in getting this bill drafted in a timely way and I would like to thank him for his enthusiasm and hard work and wish him well in his career. 
I will talk firstly about online sales. The current situation is that if a consumer wins a competitive online auction from a professional seller the consumer is not covered by the Consumer Guarantees Act. If the consumer however hits the “Buy Now” button the consumer is covered. That is an anomaly and it needs to be clarified. Unfortunately there is evidence that unscrupulous sellers are using that loophole to sell inferior products which means that the buyer has no protection under the Consumer Guarantees Act. 
Increasingly competitive online auctions are a way by which New Zealanders buy products. There are a number of online auction sites but TradeMe would be the most used website for online transactions. An astonishing 2.5 million New Zealanders are members of TradeMe. They complete around 280000 online trades a week and over 1 million a month. It is estimated that over 15000 New Zealand businesses sell on TradeMe. 
Consumers who buy through the competitive online auction process fall through a loophole in the current form of the Consumer Guarantees Act. Specifically the Act’s provisions do not apply to professional sellers when items are sold through a competitive auction. The loophole currently allows unscrupulous professional sellers to sell poor quality products without fear of come-back. 
Amongst those people taking advantage of that loophole are some motor vehicle traders. I was extremely concerned to hear reports that at the motor industry forums run in 2008 the Motor Trade Association was actively advising car salespeople to make use of the loophole to dispose of older or less reliable stock before the loophole was closed up through legislation such as this. TradeMe has been arguing for that loophole to be closed for 5 years and so have Consumer New Zealand and the Ministry of Consumer Affairs. We must do it now; it is urgent. To put it simply and bluntly New Zealanders are being ripped off. 
Currently the only recourse disgruntled buyers have is through a disputes tribunal. However without protection in law a disputes tribunal referee has little reason to find in favour of the consumer. TradeMe has been so concerned about that situation that 16 months ago it brought in a voluntary code of practice for professional traders. Trust and transparency are the two values that are paramount in the successful running of TradeMe. As an example 65 personnel or one-third of TradeMe’s staff work fulltime 24/7 actively on safety trust and policing issues. 
Last year Consumer New Zealand found that traders were selling hundreds of new computers on TradeMe with a starting bid of just $1 less than the buy-now price. Most of those computers would have been purchased through a competitive online auction and therefore would not have been covered by the Consumer Guarantees Act. It is not hard to imagine the distress of consumers who bought brand-new expensive computers that malfunctioned shortly afterwards and then found out they had no cover whatsoever. It was the view of Consumer New Zealand that unfortunately unscrupulous traders were using that legal loophole to avoid the Consumer Guarantees Act and their trading responsibilities. 
I will now talk about extended warranties. A consumer can buy an extended warranty for a huge range of items from bread makers to plasma televisions and even furniture. But Consumer New Zealand has noted that customers’ uncertainty about their legal rights and their insurance cover has created an opportunity for retailers to sell extended warranties. The costs can be significant—up to 15 percent of the purchase price. The fact is that often when consumers buy extended warranties they are probably paying for protection they are already entitled to under the Consumer Guarantees Act and other consumer laws their home and contents insurance or the manufacturer’s warranty. In some cases Consumer New Zealand has noted that the extended warranty offers less cover than consumers are entitled to under the law. 
Under the Consumer Guarantees Act manufacturers and retailers are obliged to guarantee that the products they sell are of an acceptable quality and are fit for their purpose. Most appliances certainly the big-ticket items can be expected to perform well over many years not just during the period covered by the manufacturer’s warranty. That means that under the Consumer Guarantees Act if the product fails when it is still reasonably new the purchaser can have it repaired or if that is not possible replaced even if the manufacturer’s warranty has expired. In that situation there is no value or extra benefit in having an extended warranty. 
The Consumer Guarantees Act also offers broader cover than some manufacturers’ warranties imply. For example if a product fails when it is reasonably new but has not been misused the manufacturer cannot say that the fault is because of wear and tear and refuse to repair it even if the warranty says that wear and tear is not covered. In those cases there is no additional benefit from an extended warranty that gives cover for normal wear and tear. The extended warranty may say that it covers accidental damage but so do most home insurance contents policies. 
For some people the hassle of getting legitimate repairs done using the Consumer Guarantees Act is daunting and extended warranties are an attractive alternative form of protection. That of course is a personal choice for consumers to make. Consumer New Zealand warns that importantly nothing in the warranty contract can reduce the consumer’s rights under the Consumer Guarantees Act. If a purchaser has a faulty product but is not getting compensation because of a restrictive clause in the warranty contract the purchaser can challenge the contract using the Consumer Guarantees Act. 
There are situations where an extended warranty is worth considering. Those are when the warranty cover goes beyond that of the Consumer Guarantees Act. The warranty may give cover for a very long period in the form of an extended service contract. If the purchaser anticipates giving the item a heavy workload—for example the use of a washing machine by a family of eight—the purchaser may see his or her rights under the Act expire quickly and the extended warranty may be of value in that situation. 
This bill provides that consumers must be informed about whether an extended warranty they are considering purchasing provides any benefit right or convenience that is greater than their rights under the Consumer Guarantees Act. The bill also provides for a cooling-off period once an extended warranty has been purchased. This will allow consumers to reconsider whether to continue with the extended warranty and if they decide not to do so within the cooling-off period they will be entitled to a full refund. 
Consumer New Zealand made the comment that as consumer advisers it hears more from people who have not bought an extended warranty and who are turned away by the retailer because they do not have an extended warranty even though they do not realise that they are covered by the Consumer Guarantees Act. This highlights the urgent need for both consumers and retailers to be informed about exactly what the Consumer Guarantees Act covers. I certainly hope that all parties will support this bill to go through to the select committee. It is all about protecting consumers. I commend this bill to the House. Thank you.