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Consumer Law Change

by Craig Savage CA

You may or may not know that new legislation is not far fromcoming into force in relation to Consumer Law.

The Consumer Law Reform Bill was passed in December 2013,with many changes to existing laws coming into force on 18 June 2014. Otherparts come into effect on 18 March 2015. The changes are in part designed toharmonise our laws with Australia by amending the Consumer Guarantees Act 1993(CGA) and the Fair Trading Act 1986 (FTA).

This blog will look at a few of the changes coming, that you may need to think about to avoid being caught out.

An interesting one relates to ‘UnsubstantiatedRepresentations’. This basically means that any claim (representation) you makeabout a good or service must be able to be substantiated with evidence. Or, theseller must have a reasonable expectation that claims they make are correct. Thepurpose is to stop sellers making claims they know are not accurate. Thisdoesn’t just apply to claims about a products quality, but also more generalclaims.

An example could be a store advertising an ‘Easter Sale –30% off!!!’ A consumer would be reasonable to think that they were presentedwith a chance to buy things at a price 30% lower than normal. The seller mustbe able to show that the items were in fact priced at the pre-sale price – andfor a reasonable time. A seller cant jack their prices up 50% between 8am and8:10am, then drop them and claim they are ‘on sale’.

It will be interesting to see whether this will have anyeffect on some retailers who have very regular sales – will the requirement foran item to be offered at its ‘regular’ price for a reasonable time prior to asale have any impact on what items are included in a sale, or the frequency?

Another new regulation provides a 5 day cooling off periodfor consumers when buying an extended warranty. Sellers are also required to provideclearer disclosure to customers about their rights under the CGA (many of whichare touted as benefits of buying the warranty). If you offer extendedwarranties, you need to ensure you are providing this disclosure, and be awareof the customers right to cancel within 5 days. Similarly, a 5 day cooling offperiod has been introduced for uninvited door to door sales.

There are also changes to the rules around Unsolicited Goodsand Services (UGAS). I was surprised to discover when researching this blogthat under current law someone can send you goods you haven’t asked for, andyou (the receiver) was liable to look after the goods for up to 3 months! Ifthe goods became damaged in this time, you could become liable. The new rulesmake it so the seller/sender had to advise that you are under no obligation topurchase the goods. The collection time has reduced from 3 months to 10 days,and liability for damage is only enforceable if the received deliberatelydamaged the goods. You can keep the goods as a gift if the sender breachesthese regulations.

The CGA has been extended to cover all transactions,including online businesses. This will primarily affect people who tradeprofessionally on sites like Trademe. Professional traders will need toidentify themselves, and state that the deal is covered by the CGA.

The changes that come into force in March 2015 relate tounfair contract terms. This is a fairly big change as it prohibits unfaircontract terms in standard form consumer contracts – so businesses using theseshould take a look at the wording to ensure they are compliant. Unfair ContractTerms are those which create a significant imbalance in rights between theparties (which will usually be against the consumer). Common clauses couldinclude a seller reserving the right to interpret the contract - ‘it iswhat I say’, or where it allows one party to unilaterally cancel the contract,but not the other, or where penalties can be imposed on one party, but not theother, for example an internet provider penalising the consumer for latepayment, but the consumer not being able to penalise the provider fornon-provision of service.

Overall these changes often tighten up our existing laws,and are designed to deal with new ways of doing business (particularly online).If you or your business may be affected you will need to speak to your lawyerto find out exactly what you need to do to comply. The information above is ofa very general nature and in no way covers the full gamut of ramifications.


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