If you sell extended warranties for an additional price to consumers there are rules you must comply with.
When you sell an extended warranty, you must:
provide consumers with a document that includes an explanation of the protections a consumer automatically has under the Consumer Guarantees Act (CGA) and provides information that compares the consumer's CGA protections with the protections offered by the extended warranty
explain that if the consumer buys an extended warranty, they can change their mind and cancel within 5 working days, and get a full refund of the price paid for the extended warranty.
Providing this information allows the customer to make an informed choice about whether they are better protected with an extended warranty than without one, whether they want or need the extended warranty, and whether it is worth the price.
You must provide a copy of the extended warranty agreement to the consumer at the time you sell it.
Businesses that breach these rules may be liable to an infringement notice and a fine of $1,000 for each breach, or to prosecution and a fine of up to $30,000. Individuals may also be liable to an infringement notice and a fine, or to prosecution and a fine of up to $10,000.
What is an extended warranty?
An extended warranty is sold for an additional price around the time you sell goods, such as computers, mobile phones and washing machines, or services, such as trade services. An extended warranty is different to a manufacturer's warranty, which comes free with goods. It is also different from the guarantees implied by the CGA, which apply regardless and can be avoided only in limited circumstances.
What should the extended warranty agreement include?
You must provide a written copy of the extended warranty agreement to the consumer at the time they buy it. The agreement must be in plain language, easy to read and clearly presented.
The front page of the agreement must have:
a summary of the consumer's rights and remedies under the CGA
a comparison between the relevant CGA guarantees and the protections provided by the extended warranty
a summary of the consumer's right to cancel the agreement
your business' name, street address, phone number and email address.
The front page containing the key information should not be preceded by a cover page. For example, the extended warranty should not include a promotional cover page or a cover page containing details of the terms of the extended warranty.
You should not use product names, marketing slogans and other promotional statements that are capable of misleading consumers about the extent of the benefits offered by the extended warranty or the need for the extended warranty.
The agreement must be dated and includes all of the terms and conditions - they cannot be on a separate document or webpage. This include things like how long the warranty is for, when it expires and the total price the consumer will pay.
Consumers must be able to easily identify the duration and expiry date that applies to their particular extended warranty.
Can a customer cancel the extended warranty?
When you sell an extended warranty, the consumer has 5 working days (from the time you provided them a copy of the agreement) to change their mind. If they choose to cancel the agreement within the 5 working days, they can do so and claim a full refund of the price paid for it. Note: this only applies to the extended warranty, not the goods or services.
You must tell the customer this verbally (unless the extended warranty is sold online) and it should also be on the front page of the extended warranty agreement.
What are the protections under the CGA?
There are minimum guarantees that apply to all products and services purchased from a supplier that are ordinarily acquired for personal, domestic or household use. If a guarantee is not met, the supplier of the goods or services, or in some cases, the manufacturer of goods must remedy the problem. The type of remedy depends on the nature of the failure to meet the guarantee.
You cannot mislead a customer about their protections under the CGA, for example telling them that their CGA rights are limited to a certain number of years. Doing so may breach the Fair Trading Act.