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Consumers are customers that buy your business’ goods or services for their own personal/domestic use. When your business sells to customers of this nature, the law gives you certain duties that you need to meet when you do so. Consumers need to be able to rely on the truth of your words and the general quality of your products. So, the law sets these standards to achieve that. These standards are consumer guarantees, which you must ensure your consumer goods and services follow. If you do not, the penalties you may receive can be detrimental to your finances and reputation. Therefore, this article will explain what the penalties are in New Zealand for breaching consumer guarantees.

What Are Consumer Guarantees?

Firstly, you need to make sure you know your applicable consumer guarantees and how they play out within your business. Under the Consumer Guarantees Act, any business in trade that sells to consumers needs to meet these guarantees. The table below sets out what these guarantees are.

For goods, you guarantee that:

  • they are fit for purpose and of acceptable quality;
  • you have the legal right to sell them;
  • they match any demonstrations or descriptions you give;
  • you price them reasonably where you do give a price beforehand; and
  • you deliver them on time and in good condition.

For services, you guarantee that:

  • you carry them out with reasonable care and skill;
  • they are fit for the purpose the customer asked for;
  • you price them reasonably when you do not predetermine a cost; and
  • you complete them within a reasonable time frame.

Note that consumer guarantees do not apply to commercial products, such as materials you sell to other businesses for manufacturing. They also do not apply if you have contracted out of the Consumer Guarantees Act with another business.

These are minimum guarantees that you need to make sure all of your consumer sales comply with. Having these guarantees protects consumer interests and promotes a fair standard for competing businesses to meet.

What Happens When You Fail to Meet a Consumer Guarantee?

The Consumer Guarantees Act is self-enforcing. If a customer thinks that you have not met one of your consumer guarantees, they can follow up with you about it themselves. They have the legal right to insist you provide a remedy for the broken guarantee, in the form of a:

  • repair;
  • replacement; or
  • refund.

You should outline in your returns policy how customers can contact you to begin this process.

If your mistake or fault is minor, then you get to choose the form of an appropriate remedy. However, if there is a major fault with your consumer goods or services, the customer gets to choose which kind of remedy they want. What this looks like will depend on the situation. For example, a serious fault would be if the product you sold was unsafe, such as selling a bike with faulty breaks.

If you refuse to repair a faulty product or take too long to deal with it, then a customer can ask for the other two options. They can also go to another repairer and claim back the repair costs from you.

It is best that you provide remedies in good faith. If you are genuinely at fault, you should take steps to remedy that fault. When you do not, you can take reputational hits, and the situation may get more serious.

Disputes Tribunal

But what happens if you refuse or fail to provide a remedy, or if you and your customer cannot come to an agreement? In that case, your customer can bring the matter to the Disputes Tribunal. There, you will go through a hearing process with a referee (who is usually a legal professional, but not a judge or lawyer) that will help you come to a settlement with the customer. No lawyer will represent you, so you will need to gather your own evidence to argue your case.

If that does not work, customers can take the case to the District Court for civil proceedings. 

Penalties for Misleading Customers

On top of avoiding breaching consumer guarantees themselves, you also cannot mislead your customers about their existence or nature. You may not intentionally set out to deceive your customers. However, if you mislead your customers about their consumer rights, per offence, you can face fees under the Fair Trading Act up to:

  • $200,000 for an individual; and
  • $600,000 for a company.

For example, say that you sell extended warranties along with your products. If you mislead your customers and get them to pay extra for protections they already have under consumer law with this warranty, you can face such fines. Therefore, it is crucial that you fully understand what protections the law gives your customers and that your employees do as well. 

Key Takeaways

Every business that sells goods or services to customers for consumer purposes needs to ensure they meet their consumer guarantees. If you do not, customers have the right to ask for a remedy and take the matter to the Disputes Tribunal or your District Court for further proceedings. You can also face penalties for misleading your customers about consumer guarantees. If you would like more information or help to comply with your consumer law obligations, contact LegalVision’s regulatory and compliance lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What are consumer guarantees?

Consumer guarantees are promises you make to your customers about the quality of your goods and how you sell them. They exist to ensure a fair deal for consumers.

What is the Fair Trading Act?

The Fair Trading Act is a law that regulates how businesses interact with each other and their customers in a commercial context. In particular, it prohibits misleading people about your business.

What happens if I breach a consumer guarantee?

As a result of breaching consumer guarantees, you need to provide a remedy for the customer. This remedy comes in the form of a return, refund, or replacement.

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