Opinion

Consumer Law Reform – The key changes

From 17 June 2014 various changes to the Fair Trading Act 1986 (FTA) and the Consumer Guarantees Act 1993 (CGA) came into effect.  The key changes were:

1. Unsubstantiated Representations

It is now an offence to make unsubstantiated representations in trade without reasonable grounds.   Reasonable grounds can be based on information provided by a manufacturer or supplier or any other reasonable source.  Reasonable grounds must be held at the time the trade is made.

2. Uninvited Direct Sales (door to door/telephone marketing) 

A consumer now has a right to cancel an uninvited direct sales agreement within five working days of receiving a copy of the agreement.  

3. Online selling

Traders selling over the internet must make it clear that they are in trade.  A consumer obtaining goods/services over the internet from someone in trade, is covered by the FTA and the CGA.

4. Extended Warranties

To allow consumers to properly consider how their rights under an extended warranty agreement compare with their rights under the CGA, the FTA provides that a consumer must be provided with a written copy of the agreement which must contain a summary of the consumer’s rights and remedies including a comparison with the rights and remedies under the CGA.   New rules also enable consumers to cancel extended warranty agreements within 5 working days of receiving them.

5. Contracting Out

Businesses can contract out of their obligations under the FTA only in the following circumstances:
• Both parties are in trade
• Agreement is in writing
• It is fair and reasonable to do so

6. Penalties

Fines for misleading and deceptive conduct have increased from $60,000 to $200,000 for individuals and from $200,000 to $600,000 for companies.  Individuals who repeatedly break the rules face banning orders banning an individual from being a director or involved in the management of a company for up to 10 years.

Businesses should…

• Consider contracting out of the FTA and CGA when dealing with other businesses
• Update any relevant agreements (warranty agreements, lay-by sales agreements etc) to comply with the mandatory requirements
• Ensure all supporting evidence relating to representations is retained

A number of helpful fact sheets have been prepared by the Commerce Commission.  To view the facts sheets, click on the links below:

For further information on how these changes might affect you or your business, please contact Richard Williams.