Welcome to Chapman Tripp’s consumer law update for June 2015

Our monthly review helps you to keep tabs on consumer law developments in New Zealand and overseas. This edition looks at the regulations to support the new Credit Contracts and Consumer Finance Act regime and at recent New Zealand, Australia and UK cases.

Legislation

New Zealand

Regulations to support new CCCFA regime

Regulations governing infringement offences and information disclosure exemptions under recent amendments to the Credit Contracts and Consumer Finance Act 2003 (CCCFA) came into effect on 6 June 2015.

The infringement scheme is aimed at relatively minor breaches, generally relating to the failure by creditors to disclose certain prescribed information or supply certain mandatory documents under the CCCFA. The regulations set a fee of $1000 for an infringement offence, and prescribe the form of infringement and reminder notices.

The information disclosure exemption regulations exempt the original creditor in transactions when a transfer relates to securitisation and covered bond arrangements.

Links: Infringement Offences Regulations and Regulatory Impact Statement; Information Disclosure Exemption Regulations and Regulatory Impact Statement

Cases

New Zealand

Orcon to pay $25K for providing “inaccurate and misleading personal information”

Telecommunications company Orcon Ltd (Orcon) instructed debt collection agency Baycorp to recover a debt of $208.58 owed by Mr Taylor, a soldier in the NZ Army. This instruction had “an immediate effect” on Mr Taylor’s credit rating and made it almost impossible for him to find rental accommodation for his wife and baby daughter.

Mr Taylor claimed that the debt had been waived and, accordingly,  that the information Orcon had supplied Baycorp was inaccurate and in breach of Principle 8 of the Privacy Act (the Act).

Although notified of the dispute by Mr Taylor, Orcon failed to investigate it before referring the matter to Baycorp.

The Human Rights Tribunal awarded Mr Taylor $25,000:$10,000 for loss of benefit and $15,000 for humiliation, loss of dignity, and injury to feelings. The Tribunal was critical of the fact that Orcon’s employees had little awareness of the existence of the privacy principles and ordered Orcon to provide training to its staff in relation its obligations under the Act.

There are two points of general note:

  • organisations have a legal responsibility to ensure that any personal customer information supplied to debt collection or credit reporting agencies is accurate, up to date, and not misleading, and
  • to satisfy the causation element under section 66 in the Act, it is sufficient to establish that the action or omission made, or might have made, a more than trivial contribution to the harm – not that it was the sole, main, direct, indirect or “but for” cause of it.

Link: Taylor v Orcon Ltd

Swindle v Withers [2015] NZHC 888

At issue was an undertaking given by Mr Withers, an accountant of several failed wine companies, that a loan would be applied only to meet certain production costs and that he would sign every cheque drawn against the loan facility.

Mr Withers raised the defence that the undertaking did not cause the plaintiff’s loss because it was addressed, not to the plaintiff, but to a third party.  The High Court rejected this argument on the basis that, under the Fair Trading Act (FTA), undertakings to third parties do not preclude recovery, as long as there is a causal link between the misconduct and the alleged loss.

The Court found that Mr Withers had breached s 9 of the FTA because his signature was not required on the cheques and he never had control over the application of the funds. However it reduced his liability by 50% because the plaintiff was aware that the debtor had used the advances for unauthorised purposes yet did not appoint receivers until 14 months after default.

Link: Swindle v Withers

Commerce Commission

The Commerce Commission has launched a new website for the construction industry, providing a quick guide to the key elements of competition, consumer, and consumer credit law. The construction sector is a particular area of focus for the Commission.

Link: Commerce Commission’s construction website

Banking Ombudsman

The Banking Ombudsman has ordered a bank to pay $20,000 to a business customer whose confidentiality was breached by a bank employee who methodically accessed the company’s accounts without legitimate or authorised reason.

Link: Banking Ombudsman’s decision

Advertising Standards Authority

The ASA has upheld a complaint against a television advertisement  for the new Ford Mondeo which stated that it was “More efficient than Camry Hybrid”, with a small on-screen qualifier which read: “based on Mondeo Trend 2.0L TDCI Diesel”.

The ASA emphasised that in comparative advertising, whether explicit or implicit, the advertiser must be clear about the comparison being made, i.e. price to price, feature to feature. Small fine print, especially on screen, is not sufficient.

Link: ASA’s decision – Ford Motor Company of New Zealand Ltd

The ASA has ruled that an advertisement for Earthquake Services which made a number of claims about the quality of the repair work conducted by EQC was misleading. The ASA found that the general consumer takeout was that people could not trust EQC repairs. This was unsubstantiated and the printed “disclaimer” did not mitigate the substantiation requirement.

Link: ASA’s decision – Earthquake Services

United Kingdom

Mis-selling insurance products

The Financial Conduct Authority (FCA) has been focussing on the mis- selling of add-on insurance products.

  • Moorhouse Group Ltd was fined £159,300 for failing to take reasonable care to organise and control its internal compliance systems, and
  • Clydesdale Bank was fined £20,678,300 for serious failings in its Payment Protection Insurance complaint handling processes. The size of the fine reflects the fact that the bank intentionally provided false information to the Financial Ombudsman Service.

Link: Notice to Moorhouse Group Ltd and Notice to Clydesdale Bank Plc

Australian Competition and Consumer Commission

Regulatory action

Spreets to pay A$600,000 for misleading daily deals representations

The Federal Court of Australia has fined Spreets, an online group buying website, A$600,000 for making false or misleading representations about the price of certain deals and about consumers’ voucher redemption and refund rights.

Examples include: advertising a $375 skydive deal as having no further costs when a $25 fee was charged for redeeming the voucher and stating in a number of advertisements that no refunds were available under any circumstances when in fact this was not the case in law.

Link: ACCC v Spreets Pty Ltd

AGL SA to pay A$700,000 for false or misleading discount representations

AGL SA has been fined A$700,000 and ordered to offer refunds totalling almost A$800,000 for making false or misleading representations about the level of discount consumers would receive under its energy plans.

The Judge noted that the size of the penalties should not be regarded by contraveners, and potential contraveners, as a mere cost of doing business. The Judge was also critical of AGL’s senior management team for failing to identify the breaches through the company’s internal review process.

Link: ACCC v AGL South Australia

Electronic Bazaar to pay A$100,000 for misleading consumers

The Federal Court has ordered Electronic Bazaar to pay A$100,000 in penalties for making false and misleading representations about the availability of consumer refund rights and the extent of its liability for faulty goods.

The ACCC Chairman reminded businesses that the consumer’s right to a refund cannot be excluded or modified by terms or conditions published on a website.

Link: Electronic Bazaar to pay A$100,000 for misleading consumers

Electronic Arts undertakes to provide refunds to consumers

Electronic Arts (EA), the world’s third largest publisher and developer of video games, has provided a court enforceable undertaking to the ACCC to include a refund policy in future consumer contracts in Australia and to provide refunds to Australian consumers who purchased faulty games, although the advertisement wrongly stated that they were not entitled to a refund.

The ACCC Chairman noted that “businesses such as EA selling digital downloadable goods cannot avoid their responsibilities under the Australian Consumer Law just because they are located outside of Australia.” Last year, the ACCC instituted proceedings against Valve Corporation over similar allegations.

Link: Electronic Arts’ undertaking

Market news

Verizon and Sprint to pay US$158 million for “cramming” practice

US telecommunication giants Verizon and Sprint will pay a total of US$158 million to settle a Federal Communications Commission investigation into their practice of billing customers millions of dollars in unauthorised third-party premium text messaging services. Verizon and Sprint are also required to strengthen their consumer protection procedures, for example: by obtaining informed customer consent before allowing third-party charges and clearly identifying third-party charges on bills.

Link: Verizon and Sprint to pay US$158 million for “cramming” practice

Wonga offers three-day grace period 

Britain’s biggest payday lender, Wonga, will provide consumers with a three-day grace period before applying a one-off default fee of £15. Wonga’s public image has been battered in recent years after it was exposed by Britain’s consumer watchdog for charging high interest rates and sending consumers fake legal letters.

Link: Wonga offers three-day grace period