Consumer Guarantees Amendment Bill — First Reading 
Consumer Guarantees Amendment Bill — First Reading 
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Consumer Guarantees Amendment Bill 
First Reading 
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. 
CAROL BEAUMONT (Labour) 
: 
 It is a great pleasure to rise and speak in support of the Consumer Guarantees Amendment Bill a member’s bill in the name of Dr Jackie Blue. I congratulate Dr Blue on bringing this bill to the House. It deals with an important issue. In tough economic times making sure that consumers are protected is more important than ever. Both parts of this bill address areas where there is a genuine concern in the community. I have certainly heard it being expressed and I am sure that other members of this House have too. So Labour supports this bill and will cooperate with its consideration in the select committee. 
This bill will ensure as Dr Blue has said that extended warranties will include more information about enforceable guarantees and will also ensure that there is a cooling-off period after purchasing an extended warranty during which time a consumer can cancel the warranty and be entitled to a full refund. That is important because far too many people are unnecessarily purchasing extended warranties often at quite considerable cost. As has been said the bill also extends the general consumer protections to purchases made through websites such as TradeMe. As Dr Blue has said a significant amount of buying and selling in this country occurs on TradeMe so that is very important. It is important that consumer legislation is kept up to date. I note that this matter is one that the Minister of Consumer Affairs talked about some considerable time ago. As Labour’s spokesperson on consumer affairs I heartily agreed with her at that time. But nothing has yet happened so I say again it is great to see Jackie Blue’s work here. 
We think this is a sensible bill that we should support. But an interesting point is that this bill is being introduced at a time—and there are quite specific amendments in this bill—when finally we have seen the consumer law reform discussion paper emerge just in the last day or so. The Minister of Consumer Affairs the Hon Heather Roy has been talking about this much-awaited reform discussion document for some time. It is part of her one law one door approach to consumer law. We will take the same constructive approach to that review that we are taking to this bill because consumer law is by its nature something that changes and can change quite rapidly. The requirements and needs of consumers can change quite quickly. We expect that the Government will support Dr Blue’s bill so the Government is prepared to advance some quite narrow amendments at a time when it is reviewing consumer law. But the Government also seems to be indicating that it is unwilling to support my bill which looks at putting in some regulations at what we might call the fringe end of the consumer market—the loan shark end of the consumer market—because it is reviewing the Credit Contracts and Consumer Finance Act and in fact probably because of the wider review of consumer law. Therefore the Government says it cannot possibly support the bill that I am sponsoring. That seems to be somewhat of a double standard. 
I would just put it on the record that we can look at Labour’s voting record during the term of this Parliament in relation to certain members’ bills and see that Labour members have not been petty and political about the bills that we have supported. We have supported bills on their merits. This is one such bill and Amy Adams’ bill and Simon Bridges’ bill in relation to animal welfare are two more bills that come to mind. 
As I said Labour will support the intention of this bill to amend the Consumer Guarantees Act 1993 in relation to both extended warranties and the supply of goods and services by suppliers through a competitive bidding process that uses online trading. Both provisions are about assisting consumers to make informed decisions about purchasing in terms of extended warranties and competitive bidding. In relation to extended warranties the cooling-off period during which a consumer can change his or her mind cancel a purchase and still receive a full refund is important. 
Labour is supporting this bill because it is sensible. That is a good reason to support a bill. It is sensible and it meets an express need. This bill does however underline for me just how long it has taken the Minister of Consumer Affairs to get around to doing anything. Even members of the National Government are becoming sick of waiting for something to happen in the consumer affairs area and have to put bills up to amend the legislation. It is interesting indeed to see that happening. However I acknowledge that the consumer law reform discussion paper has finally emerged this week. It is quite an extensive document I have to say and it does what the Minister said she would do which is go through most of the existing consumer law such as the Fair Trading Act the Consumer Guarantees Act the Weights and Measures Act the Auctioneers Act and the Door to Door Sales Act. That Act definitely needs to be reviewed I might add; it is one that I have been working on as well. Also included in the discussion paper are the Layby Sales Act and the Unsolicited Goods and Services Act. 
It will be very interesting to see how the process regarding the discussion paper works and what people have to say. I do hope that a real effort is made to get extensive consultation on this document and lots of submissions because certainly in terms of the review of the Credit Contracts and Consumer Finance Act despite that being an absolutely critically important area and one that is of massive concern in terms of fringe lending only 55 submissions were received. I understand that that particular review was not actively promoted to the public; there was quite a limited process of getting contributions to it. I think that was a shame. I do hope that in relation to the Minister’s consumer law reform we—absolutely all of us in this House—generate a lot of contributions to the review process. 
I comment that not only has it taken 19 months for that review document to come out—or the discussion paper I should say—but the review of the Credit Contracts and Consumer Finance Act took 9 months to come out. Despite the fact that the 55 submissions were received by the end of November still no policy recommendations have emerged from the other end of that process either. So there is a need to make sure that we make progress in terms of consumer legislation. I wonder whether this Minster’s heart is in it. Dr Jackie Blue on the other hand has not sat by and waited for things to happen. She has got out there with this member’s bill and brought it to the House and we support her in that. 
Much change is needed by consumers and perhaps it is worthwhile to reflect on the sorts of things that are needed. As I said in tough economic times the consequences of making poor consumer decisions can be very significant for families. There can be situations where people do not know their rights; in fact those situations are very common. I am sure that across this House we would share a concern about things like poor levels of financial literacy and a lack of understanding of consumer rights. The consequences of that can be very very significant for families. Improving consumer knowledge and protection is important; that is a good purpose of this bill. 
I think that probably we need to do some work in the consumer area around vulnerable consumers in particular. There are people who because of language barriers low literacy poverty or age—because they are older or younger—are perhaps not as able as other people to look after themselves. We have seen some very sad cases. Just in the last week I read about the case of an elderly lady who was absolutely pressured into buying a completely unnecessary vacuum cleaner. She was completely traumatised by the whole experience and she felt that she had been physically intimidated by the salesperson. So consumers particularly vulnerable consumers need much information. I do think we need to look at situations where exploitation is happening as is the case with regard to loan sharks. 
Of course updating our consumer law is also important because relationships in the consumer area change. Who would have thought that there would be the amount of trading online that now happens? Who would have thought that even 3 years ago? Certainly 10 years ago it would have been a complete surprise to people. From this side of the House I think one can imagine that we want to see greater regulation in some areas and certainly the area of loan sharks is an example of that. 
Finally in terms of what consumers need I say there is also an increasing desire by consumers to ensure that the products that they buy are well understood and are ethically made—all of those things. That is my final point in terms of consumer law. 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 I rise to speak to the Consumer Guarantees Amendment Bill which has been presented to the House by my colleague Dr Jackie Blue. I commend her for bringing this bill to the House. It is a bill that is welcome. It is overdue as Dr Blue stated in her speech to this House and I support it. I preface my comments by saying that this National-led Government is committed to promoting an environment where consumers may make purchases knowing that their consumer rights are protected. That is particularly important. This National-led Government is also about enacting effective consumer laws to develop a competitive business environment where both consumers and businesses can engage with each other with trust and confidence. We are about enacting laws that help to build a more productive and innovative economy. That is what this Government stands for. 
I welcome the Labour’s support for this bill; that is to be commended. It is the only member’s bill tonight I believe that enjoys multiparty and cross-party support and we welcome Labour members’ support for the bill. As has been stated by the previous two speakers it amends the Consumer Guarantees Act 1993 in two specific areas: first in relation to extended warranties and second in relation to the supply of goods and services by businesses through a competitive bidding process using an online trading facility. The latter issue was discussed in the Commerce Committee earlier during this term with regard to motor vehicle sales and the conclusion that we came to was consistent with what Dr Blue is suggesting in this bill. 
The main provisions of the bill provide that consumers are to 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 Act. That is important. But the other clause in the bill that has not been mentioned is that it provides for a cooling-off period of 7 days once an extended warranty has been purchased. That allows consumers to reconsider whether to continue with the extended warranty. If they decide not to continue with it within that cooling-off period they may cancel the extended warranty and they will be provided with a full refund. In terms of competitive online auctions this bill protects those consumers who for example buy a sofa online in a competitive bidding process. That would attract the same Consumer Guarantees Act rights as if that sofa was bought at a national retail store of the same supplier. This bill means that consumers and suppliers will have confidence in market rules and that is really important. They will have confidence that when they buy a product or service their reasonable expectations about that product or service will be met. In such circumstances the consumer must understand that if those expectations are not met their rights will be maintained and asserted. 
We have heard about the success story of modern New Zealand that is online trading through TradeMe. This bill will address a lot of the anomalies that occur through online trading where dishonest professional sellers are using the legal loophole to sell goods without having any fear of being held to account. This bill will protect the rights of those consumers. 
The bill is also about extended warranties for goods that are sold. Those extended warranties started being sold for electrical goods but they now cover a whole range of items including home appliances furniture and the like. Often when consumers buy an extended warranty they are likely to pay for the protection that they are already entitled to and that must be clear at the time of purchase. 
I support this bill because ultimately it is about enhancing the rights of consumers and about ensuring that consumers receive the protection they deserve under the Consumer Guarantees Act. Thank you. 
CHARLES CHAUVEL (Labour) 
: 
 As a Parliament we have the responsibility to ensure that New Zealand’s legislation is relevant to the context of our times. Sometimes that may mean tweaking Acts to bring them into line with technology that had not been developed when they were originally passed. This it seems to me is what Dr Jackie Blue’s Consumer Guarantees Amendment Bill aims to do in amending the Consumer Guarantees Act 1993. For that reason as my colleague Carol Beaumont has said Labour members will support at least its referral to a select committee. This seems to be a sensible bill in that it appears to ensure that the principle of protecting consumers is upheld in our modern day and age. 
I think it is important to note in passing that the National Party backbenchers from the speeches that have been given so far seem to be more on to it in relation to consumer affairs issues than the Minister of Consumer Affairs Heather Roy who has proven through the document that my colleague Carol Beaumont referred to earlier that she thinks the complexity of the issues involved is only an excuse not to act. 
One of the technological developments that we have to be mindful of in this context is online bidding on sites like TradeMe. This has become increasingly popular in recent years with many professional sellers effectively choosing to sell their goods and services via such sites. These sites have moved beyond just being fora for individuals to sell second-hand goods. With the increasing popularity of competitive online bidding we have seen the inconsistencies arise that other speakers have referred to. The Act was passed in 1993. It incorporates a principle that I think has broad support across the House: the protection of the consumer when buying goods. But there was no equivalent of online bidding at the time that the Act was passed so of course no consideration could be given to how the Act’s aims could be achieved in that context. 
As an earlier speaker said one of the inconsistencies raised in the bill and dealt with by it is the fact that on sites like TradeMe consumers are protected if they purchase goods in one way but not in another. If there is a bicycle for sale on the site buyers are protected by the Act if they hit the “Buy Now” button but not if they win through a series of bids. The bill will remedy that by amending section 41 of the Act. It will add a new subsection (4) to it to clarify that the rights of consumers under the Act will apply to the supply of goods and services through a competitive bidding process using an online trading facility. In this way the original intent of the Act of protecting all consumers will be brought into line with the reality of online trading and its increased popularity. 
The bill also seeks to improve the Act in relation to extended warranties. Generally these are sold to consumers who buy electrical appliances like fridges or washing machines but despite the name they generally do not give consumers any more rights than they already have under the Act. Clause 5 of the bill would insert new sections 15A and 15B to require suppliers to disclose any extra benefits as a result of offering an extended warranty to consumers. That makes for a fairer situation for them where they are able to assess whether to pay more on the basis of quality rather than because of the attractive sound of a so-called extended warranty that may not actually give them any extra protection as a consumer. The bill also allows for an innovation that is common now in New South Wales and other jurisdictions which is a cooling-off period immediately after the purchase of an extended warranty so that consumers can have fair time in which to consider whether they really wanted to make the purchase that they have under this legislation preliminarily concluded. 
All in all the bill seems to be sensible. It tweaks the Act to make it fairer and more relevant to the way in which things work today. The member has done a good job and should be congratulated on that. But I must ask why the Government is so willing to make changes in this area when it is currently failing to offer support to my colleague Carol Beaumont for her loan sharks bill because it is “an area under consideration”. Unfortunately I am led to the conclusion that the Government places petty politics above the importance of protecting our most vulnerable consumers. It would be really nice to be proven wrong about that in 2 weeks’ time on the next members’ day. 
MELISSA LEE (National) 
: 
 It is a pleasure to rise to speak for a very short time on the Consumer Guarantees Amendment Bill in support of my colleague Dr Jackie Blue who is sitting next to me. She is also my neighbour and colleague. We have offices on the same floor in Bowen House and she is also right next door in my neighbouring electorate of Mt Roskill as a National list MP and what a wonderful MP she is. It is a pleasure to rise to support this bill. 
This bill is about consumer rights and this Government is committed to promoting an environment where consumers—and all of us fit into that category—can make purchases knowing that our rights are protected. But it seems that our rights are not always protected as they should be. As in the example that Jackie gave at the beginning of this debate if one wins a competitive online auction from a professional seller such as the TradeMe online auction site we as consumers are not covered by the Consumer Guarantees Act. But if I hit the “Buy Now” button in the same online auction I am covered. That anomaly must be fixed. 
Debate interrupted.