New Zealand Vacuum Cleaner Company Limited (trading as Godfreys) was today fined $48,000 in the Manukau District Court after earlier pleading guilty to 10 charges relating to its extended warranty agreements.

Its extended warranty agreements did not include key information which the Fair Trading Act requires to be disclosed to consumers in all such agreements. Godfreys sold over 3,000 non-compliant extended warranties to customers for over a year after the new law relating to extended warranties was introduced in June 2014. It stopped selling extended warranties in September 2015.

Godfreys’ extended warranty agreements were non-compliant because they did not summarise the customer’s rights under the Consumer Guarantees Act. This included explaining how the extended warranty compared with consumers’ rights under the Consumer Guarantees Act and explaining that the customer could cancel the extended warranty within 5 days of buying it. The company also failed to tell customers about their cancellation rights before signing them up to an extended warranty.

Commissioner Anna Rawlings said Godfreys’ offending deprived over 3,000 consumers of information they should have had to help them assess what added benefits the extended warranty offered when compared with their existing rights under the Consumer Guarantees Act.

"The law aims to give consumers the information that they need to help decide if the additional protection offered by the extended warranty represents value for money when compared with rights that they already have under the Consumer Guarantees Act."

"It is essential that businesses selling extended warranties comply with these requirements and consumers remember that the Consumer Guarantees Act offers some protection whether or not they choose to purchase an extended warranty as well," she said.

Background

Godfreys sells vacuum cleaners and other cleaning products to both retail and commercial sectors. It has been operating in New Zealand for approximately 15 years and has 31 stores nationwide.

Between 17 June 2014 and 22 September 2015 Godfreys sold extended warranties to consumers at an additional price when they purchased their goods. Warranties for products costing $200–599 were $49 until August 2015 and then $69 after that. Warranties for products over $600 were sold for $99.

Godfreys wrote to customers to provide new disclosure and an opportunity to cancel their extended warranty contract. If you purchased an extended warranty between 17 June 2014 and 22 September 2015 and were not contacted by Godfreys you may wish to contact them.

Extended warranties

Extended warranties are sold as an add-on item when a consumer buys goods, such as computers and washing machines, or services, such as trade services. It is different to a manufacturers’ warranty which may be included in the price or guarantees under the Consumer Guarantees Act.

The Fair Trading Act was amended in June 2014 to provide additional disclosure requirements for extended warranty agreements and additional rights for consumers to cancel an extended warranty after purchase. For further information see the Commission's online guidance.