Extended warranties' time up?

A consumer law review suggests some retailers may be taking advantage of unsuspecting shoppers by selling them extended warranties which are not worth the paper they are written on.

The review by the Consumer Affairs Ministry takes aim at the warranties – commonly offered on computers and electronics items – claiming retailers effectively charge consumers an "economic rent" by relying on their ignorance or uncertainty of their legal rights.

Extended warranties or guarantees claim to provide an extended period of cover for faulty goods, but often do not provide more protection than the Consumer Guarantees Act – which states consumer goods are required to last for a "reasonable period", regardless of warranties.

The ministry proposes several regulatory measures to prevent consumers unnecessarily buying the warranties. They include requiring retailers to disclose the details and pricing of extended warranties in advertising and to disclose people's statutory rights under the act.

Shoppers could also be given a cooling-off period, in which they could cancel the warranty, and retailers could offer an opt-in period, giving customers the chance to consider their rights and whether they would benefit from an extended warranty.

The review cautions retailers that failing to advise customers of their legal rights and then attempting to sell them those rights could be breaching the Fair Trading Act.

Consumer New Zealand adviser Maggie Edwards says retailers "mis-sell" extended warranties and it supports the remedies proposed in the review.

It has fielded complaints from people whose appliances have broken after 13 months, but are told by retailers they have no cover beyond the 12-month manufacturer's guarantee because they did not buy an extended warranty.

Some retailers already provide a "cooling-off" period, she says.

Similar measures were imposed on British retailers in 2005 and by 2008 the number of shoppers buying the warranties at point of sale had dropped from 82 per cent to 62 per cent.

Some warranties do provide extra cover, such as for wear and tear. Others contain fish hooks: for example, expiring once a claim is made. The public has until July 30 to make submissions on the review.

BusinessDay.co.nz