Welcome to Chapman Tripp’s consumer law update for April

Our monthly review helps you to keep tabs on consumer law developments in New Zealand and overseas. This edition reviews updates and developments from the New Zealand, Australian and UK consumer regulators. We also look at some recent market developments.

Cases  

Mercedes-Benz Financial Services New Zealand Ltd v Desmond James Albert Conway [2015] NZHC 315

Mercedes-Benz Financial Services New Zealand Ltd (Mercedes-Benz) has been refused summary judgment against Desmond James Albert Conway (Conway) for three consumer credit contracts for Mercedes-Benz motor vehicles. Conway defaulted on the payments and Mercedes-Benz is seeking the outstanding amount.

The Court found that there was real doubt or uncertainty about whether there was sufficient evidence, for summary judgment purposes, of who owned the title to the motor vehicles.

Link: Mercedes-Benz Financial Services New Zealand Ltd v Desmond James Albert Conway

Legislation

Responsible Lending Code

The Responsible Lending Code (the Code) has been released, providing guidance on the lender responsibility principles in the Credit Contracts and Consumer Finance Act 2003. The principles were introduced to provide greater protection for consumers borrowing money. The Code and the principles will come into force on 6 June 2015.

Link: Responsible Lending Code

Link: Chapman Tripp commentary – on the draft Responsible Lending Code

Commerce Commission

Commission targets ‘opt out’ pricing as Air New Zealand (Air NZ) agrees to change how it sells travel insurance  

The Commerce Commission has finalised its investigation into Air NZ’s practice of selling travel insurance on an ‘opt out’ basis by issuing a warning letter. As reported in our March review, the Commission was concerned about the potential for customers to be misled by Air NZ’s online system. Air NZ has since stated its intention to now sell travel insurance on an ‘opt in’ basis.

The Commission has said it will be targeting companies with similar ‘opt out’ practices for investigation.

Link: Commission targets ‘opt out’ pricing as Air New Zealand agrees to change how it sells travel insurance

Link: Commission’s warning letter to Air NZ

Commission issues infringement notices to motor vehicle dealers

The Commerce Commission has issued infringement notices for the first time following last year’s reform of the Fair Trading Act 1986.

After complaints from the public, the Commission issued notices to three motor vehicle dealers for failing to disclose trader status online and not clearly displaying the motor vehicle’s year, make and model, price, odometer reading and whether or not the car was imported as damaged.

Link: Commission uses new enforcement tools

Advertising Standards Authority (ASA)

Flip television advertisement

ASA upheld a complaint about a television advertisement for Flip, advertising a monthly price of $55 for 20GB of broadband internet and a home line with free national calling with no contract. The complaint was that the advertisement gave a false impression to the consumer that the deal would be available for a reasonable time. The advertisement failed to state that the cost of the service would be raised to $60 per month from the next billing period.

Link: ASA decision - Flip

AA Motoring sign advertisement

ASA upheld a complaint about an AA Motoring advertisement for free driving lessons for AA Members and their children through the AA Driving School. The sign stated that terms and conditions applied. A condition, not stated on the board, was that only learner licence holders, who have held that licence for less than two months, would qualify for the free lessons.

A majority upheld the complaint, noting that the advertisement’s terms and conditions were unclear causing confusion as to what the conditions were and where they were to be found. The Advertising Standards Complaints Board (ASCB) also held that omitting the important two-month condition was misleading, as the condition significantly diminished the offer of free driving lessons.

Link: ASA decision - AA Motoring

Southland Real Estate advertisement

The ASA has upheld a complaint against Southland Real Estate about a misleading advertisement on Trade Me. The advertisement stated that the property had three bedrooms when in reality, it had two bedrooms and a sunroom. The ASA acknowledged limits in the software, causing the advertiser to advertise either two or three rooms in the heading rather than two and a half rooms to account for the sunroom. However, the Board also noted that the advertiser continued to refer to three bedrooms in the body of the advertisement.

Link: ASA decision - Southland Real Estate

Australian Competition and Consumer Commission (ACCC)

Regulatory action

Targeting of alleged false and misleading Nurofen claims

ACCC has instituted proceedings against Reckitt Benckiser (Australia) Pty Ltd (Reckitt Benckiser).

ACCC claims that Reckitt Benckiser has made false and misleading claims in advertising Nurofen specific pain products such as “Nurofen Back Pain” and “Nurofen Tension Headache”. Despite being advertised as designed to treat specific kinds of pain, it is alleged that the products are identical to generic Nurofen products.

ACCC is seeking declarations, injunctions, an order for the publication of corrective notices, penalties and costs.

Link: ACCC targets alleged false and misleading Nurofen claims

ACCC takes action against We Buy Houses Pty Ltd (We Buy Houses) and Rick Otton regarding property strategies

The ACCC has instituted proceedings in the Federal Court against We Buy Houses after a coordinated investigation with New South Wales Fair Trading.

We Buy Houses promotes “wealth creation strategies” through training programmes such as boot camps and seminars. ACCC alleges that the company makes representations that consumers can learn, for example, how to buy a house for $1. ACCC’s position is that the strategies actually “involve consumers acting as middlemen to facilitate property transactions between third party sellers and third party buyers…” and this will still result in the purchaser paying the full purchase price at a later date.

ACCC is seeking penalties, injunctions, corrective advertising, costs and also a disqualification order against Rick Otton.

Link: Coordinated investigation results in ACCC taking action against We Buy Houses and Rick Otton regarding property strategies

iiNet Limited (iiNet) pays $204,000 in penalties

iiNet has paid $204,000 in penalties after being issued two infringement notices by ACCC. The notices related to iiNet’s advertisements for their Naked Broadband 250 GB Plan which failed to prominently show the total minimum price of the service. ACCC’s Chairman Rod Sims clarifies that “[p]rominence means that the total minimum price can be easily seen and strikes the attention of the consumer. In assessing whether the total minimum price is prominent, it is important to consider the context in which the advertisement appears…”

Link: ACCC issues infringement notices for Naked Broadband Plan advertisements

UK Competition and Markets Authority

Consultation on unfair contract terms: draft guidance on consumer protection law

The UK Competition and Markets Authority is consulting on draft guidance on the new unfair contract terms under consumer protection law. The Consumer Rights Act 2015 is due to come in to effect in October 2015. The Act applies to rights and responsibilities stated in contracts between consumers and businesses and aims to limit unfair advantage. Consultation closes on 20 March 2015. As reported in our March review, the New Zealand Commerce Commission has recently published its approach to the New Zealand unfair contract provisions.

Link: CMA consultation on Unfair Contract terms: draft guidance on consumer protection law

Market News

UK Financial Conduct Authority (FCA) announces new research on the influence of annual account summaries on consumer behaviour

UK’s FCA has announced research showing that annual account summaries released by banks have failed to persuade people to avoid overdraft charges, improve balance levels or switch between providers. The FCA has indicated that text messages and mobile device apps are more effective in changing consumer behaviour.

Link: British watchdog tells banks to text time-poor customers

US Consumer Financial Protection Bureau (CFPB) critical of arbitration clauses in consumer contracts

The CFPB has released a study critical of arbitration clauses in financial contracts between consumers and banks or credit card companies. Arbitration clauses restrict customers’ rights to bring disputes, which could result in financial redress, before a court. Clauses like these are widespread, affecting tens of millions of consumers. Industry groups have responded by saying that the clauses offer faster and cheaper dispute resolution.

Link: Binding arbitration rules get Consumer Protection Bureau scrutiny