Tougher consumer laws protect online buyers, boost penalties

The biggest changes in 20 years to consumer protection laws come into force today.

The Consumer Guarantees Act and Fair Trading Act will give consumers greater protection against unfair practices and dodgy dealers while substantially increasing penalties for offenders.

The reforms also cover high-pressure sales techniques such as door-to-door selling and telemarketing, extended warranties and unsubstantiated product claims.

Online purchasing
Key changes include the amendment of the Consumer Guarantees Act to cover goods bought at online auctions.

The expanded CGA will those who are professional sellers, whether they are selling new or second hand goods. Occasional sellers auctioning second hand goods do not fall under the law.

"Up until now, goods bought through auction on sites like Trade Me have been excluded from the act," Consumer NZ chief executive Sue Chetwin says.

"That's been a windfall for the growing number of traders who use auction websites because they've been able to avoid any responsibility for faulty goods. This won't be able to happen anymore." 

In addition, online traders will have to disclose whether they're "in trade" so consumers know who they're dealing with. Consumers will also have more protection against retailers who push extended warranties.

Extended warranties
Retailers will have to outline what protection their extended warranties provide, over and above the guarantees already provided under the Consumer Guarantees Act.

"Extended warranties have been heavily promoted, often with confusing or misleading information about the benefits they offer. But in many cases, you're paying for protection you already have by law. Retailers now have to tell you about your existing legal rights," Ms Chetwin says.

New door-to-door selling laws will give consumers five working days to cancel a sale if they change their mind about the purchase. The rule also applies to telemarketing sales.

"We continue to get regular complaints about the high-pressure sales tactics used by door-to-door salespeople," Ms Chetwn says. "Consumers finally have some extra protection against these traders."

Other changes to the Fair Trading Act will ban unsubstantiated product claims. This means businesses won't be able to make claims about a product or service if they don't have evidence or reasonable grounds for making the claims.

Heavier penalties
Businesses will also face substantially tougher penalties for serious breaches of the Fair Trading Act. Maximum penalties for misleading and deceptive conduct, false representations, and unfair practices have increased from $60,000 to $200,000 for individuals and from $200,000 to $600,000 for businesses.

Individuals who repeatedly break the law will face banning orders for up to 10 years. Businesses will also face penalties for failing to comply with the rules relating to door-to-door sales, extended warranties and lay-by sales.

The Ministry for Consumer Affairs has more information on the law changes and in www.knowyourrights.co.nz