Recent PB Technologies' charges signals focus by Commerce Commission on extended warranties
PB Technologies Limited (PB) has pleaded guilty to 14 Fair Trading Act (FTA) charges brought by the Commerce Commission for failings in its extended warranty agreements. This decision should act as a warning to businesses to ensure their extended warranties are compliant.
Rules for selling extended warranties
The FTA requires businesses retailing or supplying extended warranties to:
- ensure that the front page of the warranty policy explains the protections that consumers are entitled to under the Consumer Guarantees Act 1993 (CGA);
- compares those statutory protections with those offered by the extended warranty; and
- explains that, if consumers buy an extended warranty, they can change their minds within a 5 day 'cooling off' period.
From a practical and marketing perspective, this can be easier said than done.
In addition to these written disclosure requirements, the person selling the extended warranty must (where reasonably practicable) tell the consumer prior to purchasing about the right to cancel.
The rules applicable to selling extended warranties came into force with amendments to the FTA in 2014.
Charges against PB for non-compliant extended warranty agreements
Charges were brought against PB on the basis that its extended warranties, which were sold to customers that purchased PB products between May 2017 and November 2017, failed to provide the disclosure information required under the FTA. Specifically, the agreements did not contain a summary comparing customers' rights under the CGA with the rights provided by the warranty. Customers were also not given a copy of the warranty agreement after paying for it and were not told their cancellation rights before signing up to the extended warranty.
Sentencing for the extended warranty charges will take place in September.
Following its investigation, the Commerce Commission also warned PB for bait advertising after it promoted Apple watches at special sale prices in an email to roughly 100,000 people when it only had 14 watches available at those prices. Commerce Commissioner Anna Rawlings stated that businesses should not promote sought-after goods to attract consumers unless those goods were available in reasonable quantities, or the business had made it clear that the goods were only available in limited quantities.
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