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Godfreys fined over extended warranties

Consumer boss explains why extended warranties are almost never a good deal.

Mon, 19 Dec 2016

The NZ Vacuum Cleaner Company (trading as Godfreys) was today fined $48,000 in the Manukau District Court after earlier pleading guilty to 10 charges related to its extended warranty agreements.

Its extended warranty agreements did not include key information which the Fair Trading Act requires to be disclosed to consumers in all such agreements. Godfreys sold more than 3000 non-compliant extended warranties to customers for over a year after the new law relating to extended warranties was introduced in June 2014. It stopped selling extended warranties in September 2015.

Godfreys’ extended warranties fell foul of the FTA because they did not summarise the customer’s rights under the Consumer Guarantees Act. This included explaining how the extended warranty compared with consumers’ rights under the Consumer Guarantees Act and explaining that the customer could cancel the extended warranty within five days of buying it.

The company also failed to tell customers about their cancellation rights before signing them up to an extended warranty, says the Commerce Commission, which brought the charges.

Commissioner Anna Rawlings said Godfreys’ offending deprived more than 3000 consumers of information they should have had to help them assess what added benefits the extended warranty offered when compared with their existing rights under the Consumer Guarantees Act.

The case was the first prosecution under FTA provisions, which impose specific obligations on companies selling extended warranty agreements and came into force in 2014, the regulator has previously said. Under the provisions, the warrantor must explain some guarantees are already provided to consumers under the CGA, and provide comparative information on CGA guarantees and the protections being sold under the warranty.

NZ Vacuum Cleaner Co is owned by Australian Vacuum Cleaner Co, which also operates the Godfreys chain in Australia. It has 31 stores in New Zealand, where it has operated for about 15 years.

Almost never a good deal
Earlier, Consumer chief executive Sue Chetwin told NBR, that extended warranties are more about profit-making for retailers than benefits for the buyer.

“There are virtually no situations where the [extended] warranty gives you better coverage than you can get under the Consumer Guarantees Act (CGA),” Ms Chetwin says.

The act says goods must last a reasonable time. A Disputes Tribunal can judge that a reasonable time is more than the 12 months typically afforded by a warranty. 

If a product fails within a reasonable time, it must be repaired, replaced or refunded in a reasonable time. The retailer has prime responsibility under the act. If a retailer goes bust, you can approach an importer or manufacturer – though in logistical terms that can be trickier.

“Under the new consumer law, it’s up to the retailer to tell you about the Consumer Guarantees Act, and if there is anything about their [extended] warranty that’s better than the act,” Ms Chetwin points out.

This is an interesting point. I’ve often annoyed checkout clerks at Dick Smith and other chains by piping up with, “You’re covered by the Consumer Guarantees Act” when there’s an attempted up-sell on the person queueing in front of me. I’ve never heard a shop assistant proactively mention the CGA.

An important point to note is that business sales are not typically covered by the CGA.

I found that after I bought a Dell laptop through an NBR account. It died shortly after purchase and Dell, to my annoyance, replaced the motherboard with a second-hand part.

I thought I would just claim a refund under the CGA and be done with it – but no dice. I got on the phone to Consumer but, in this instance, the law did not have me covered.

Sellers can and do contract out of the CGA for sales to business customers. 

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Godfreys fined over extended warranties