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A product safety issue can arise at any time
self-regulation and education are our primary tools
Demand for the Ministry's Consumer Advice service has increased rapidly
The Act has become increasingly outdated
existing barriers to entering the industry will be removed
Its objective is to reduce regulatory barriers to the movement of goods and services between New Zealand and Australia
The most significant New Zealand issue so far is "country of origin" labelling
The issue here is the length of the limitation period: often , it is too short for today's marketplace realities
The Limitation Defences Bill is a priority
Effective means of redress for consumers is of major importance
Credit is becoming the primary currency
Existing credit law in New Zealand is unclear, inconsistent, and consquently unfair |
Product Safety There is no co-ordinated approach to product safety matters in New Zealand. Product safety policy and complaints are dealt with under a variety of legislation and by a range of Government agencies. For example, the safety of electrical and gas products is the responsibility of the Energy and Resources Division of the Ministry of Commerce. Transport related safety issues, such as motor vehicle standards, seat belts and motorcycle and cycle helmets are the responsibility of the Ministry of Transport. All food related safety issues are the responsibility of the Ministry of Health. The Department of Labour is responsible for safety issues concerning explosives, fireworks and the workplace. All of these jurisdictions are granted by specific legislation. The Ministry of Consumer Affairs uses the broad powers granted by the Fair Trading Act to cover areas not elsewhere legislated, although those powers can also, if required, be used in such areas.
The issue A product-safety issue can arise at any time, usually without prior warning. The Minister of Consumer Affairs has the power to recommend the making of product safety standards and the responsibility and the power to ban unsafe products or recall them from circulation. The Ministry advises the Minister on this. Developments so far In practice, most product-safety questions are resolved voluntarily and the Minister's powers are seldom required. There have been only four instances of product banning, all related to children's toys: pistol crossbows, water pistols with fluids that were dangerously alkaline, three brands of unsafe toy guns, and children's bangles that contained contaminated water. In 1989 the Minister ordered a compulsory recall of certain unsafe bicycles, the only time these powers have been used. Current policy in this area stresses industry self regulation and consumer choice. It acknowledges that, while hazards must be controlled to some extent, consumers should have the freedom to manage their own risks. To do this, they need to be sure that a product will be reasonably safe in normal use. If a product involves serious risk, then consumers need more information on what that risk is, and on how they can minimise it. We are presently preparing a policy paper on mandatory versus voluntary product-safety standards. We have keenly felt the impact of pressure groups in this area in the past, with debate at times being heated and emotional. But we believe that self-regulation and education are our primary tools and that more interventionist options are a tool of last resort. In line with the current policy of industry self-regulation, we have been working with importers, manufacturers and retailers of infant products to improve the level of safety of these products. Many manufacturers and importers have expressed their willingness to comply with voluntary standards, but a method needs to be developed to ensure consumers are aware of which products comply with the standards. We favour the establishment of an industry group which would manage and promote voluntary standards. Industry representatives have met over recent months and have agreed to form an association. They are now working on how the association should be set up and organised. Another issue that might arise relates to cigarette lighters. There have been occasional calls in the past to introduce a mandatory standard requiring all disposable lighters to be child resistant. Australia has recently decided to take this approach but we have not followed suit. Action timeframe As mentioned earlier, product-safety issues occur unpredictably. Currently, there appear to be no major issues requiring attention - although this may of course change. As mentioned earlier, the Ministry's Consumer Advice Service provides advice and information to consumers, with particular emphasis on targeting low- income, Maori, and Pacific Islands consumers. The issue Demand for the Ministry's Consumer Advice Service has increased rapidly since the introduction of the Consumer Guarantees Act 1993. There were 49,122 calls handled in the 1995196 financial year, compared with 28,566 in the year immediately preceding the introduction of the Act (1992193). 7here has been no increase in resources over that time. The Service has also had difficulties in reaching its target groups. A survey undertaken in 1994195 showed that less than 20 per cent of callers were low income, Maori or Pacific Islands consumers. Developments so far To deal with both these issues, a major refocusing exercise began at the start of 1996 - the first of its kind since the Advice Service was established in 1988. The exercise is looking closely at how the Service can become more relevant to its target consumers. We believe that a tighter focus on their needs will ease the problem of excessive demand (which is largely coming from articulate middle income consumers). We will be consulting representatives of our consumer target groups on ways the Service might better reach them, and on the impact that any proposed changes to the Service might have on them. We will also be consulting consumer-advisory groups such as Citizens Advice Bureaux and Budget Advisory Services about this. Action timeframe Operations staff are currently providing a limited 4-day-a-week Service in order to work on the refocusing exercise. The timeframe for completion is mid to late 1997: we expect to know by March 1997 what changes should be made, and will implement these changes progressively during the year. Changes To The Motor Vehicle Dealers Act 1975 The Motor Vehicle Dealers Act 1975 gives a range of statutory rights to consumers who buy vehicles from licensed motor vehicle dealers. These rights include good title to the vehicle, a warranty, some standardised information about the vehicle, and an independent tribunal for disputes. The issue Reform of the Motor Vehicle Dealers Act (which is administered by the Ministry of justice) has been an issue for some considerable time. The Act has become increasingly outdated, and is not relevant to the needs of consumers in today's motor-vehicle market. Developments so far In 1993 the Ministry completed an examination of the Act, as part of providing evidence to support the need for a comprehensive review of it. Following this, Cabinet requested that a full review of the Act be carried out by an interdepartmental team from justice, Treasury, Commerce and Consumer Affairs - with assistance from Police and Ministry of Transport. In late 1995, the Government made final decisions on the review. As a result, the Motor Vehicle Dealers Act will become much more specific, and will more clearly bring general consumer laws such as the Fair Trading Act and the Consumer Guarantees Act into the range of legislation that dealers must comply with. Most existing barriers to entering the industry will be removed. But dealers will entering the industry still be required to be above a minimum age, have no relevant criminal will be removed conviction, and not be bankrupt. The statutory role of the Motor Vehicle Dealers Institute has been removed, as has the statutory provision for a Motor Vehicle Dealers Fidelity Fund. The removal of the fidelity fund is a contentious issue. Currently, the fund provides back-up where a consumer (or in limited situations, a financier) has a financial claim against a licensed dealer who will not pay or who has gone into liquidation. We view the fund as a very efficient form of insurance against non payment of debts ($50 per dealer per year) and therefore an effective consumer protection measure. Many consumer groups have indicated that they are planning to relitigate this decision at the select committee stage. The Ministry of justice recently completed the drafting instructions and sent them to Parliamentary Counsel. The existing Act's requirements for disclosure of information will be moved into the Fair Trading Act, in the form of a consumer information standard. This has benefits in that the Fair Trading Act is enforced by the Commerce Commission and the second-hand motor vehicle market is one of its proactive areas of interest. Action timeframe It appears likely that this issue may require fairly immediate action. We have become aware that the three key industry groups - the Imported Motor Vehicle Dealers Association, the Motor Vehicle Dealers Institute and the Motor Vehicle Manufacturers Association - are dissatisfied with the Act's review, and have said that they plan to lobby the new Government to reconsider the review and the draft legislation. Trans Tasman Mutual Recognition
The Trans Tasman Mutual Recognition Arrangement (TTMRA) between New Zealand and Australia has recently been signed. Its objective is to reduce regulatory barriers to the movement of goods and services between New Zealand and Australia. It will mean that:
The issue The most significant New Zealand issue so far is "country of origin" labelling. (Other issues may yet develop, including some which are of more concern to Australia.) Through a Consumer Information Standard made under the Fair Trading Act, all clothing and footwear sold in New Zealand must be labelled to show the country of origin. Australian country-of-origin labelling regulations are different. While they require all imported clothing and footwear to show country of origin, they do not require Australian-made clothing and footwear to do this. This means that it will be possible for clothing and footwear manufactured in Australia to be sold in New Zealand with no country-of-origin labelling. Clothing and footwear manufactured in New Zealand and sold in New Zealand will need to be labelled to show country of origin, as at present. Developments so far Some industry groups which support country-of-origin labelling have expressed concern about the consequences of TTMRA, claiming it makes enforcement difficult. They also point out that it makes a nonsense of the New Zealand law to allow unlabelled Australian product into the market while requiring New Zealand (and all other countries' products) to show country of origin. Action timeframe The TTMRA will come into operation once implementing legislation is passed and comes into force in both countries. This is expected to happen in the first half of 1997. The Ministry is discussing the implications of the country-of-origin labelling issue with the Manufacturers' Federation, the Retail and Wholesale Merchants' Association, and the Commerce Commission. We expect to report by December 1996 on possible options for dealing with this issue. The Limitation Period In The Fair Trading Act The Fair Trading Act 1986 attempts to ensure that all trading activities are based on accurate and honest information. It also gives consumers a three-year period (the limitation period) in which to bring a civil case against a trader whom they believe has misled them. The three years starts from the time the misleading conduct occurred, not when it was discovered.
The issue
This is particularly true for domestic housing, and for financial transactions such
as superannuation policies and long-term investment. For example, the way
information is presented about how an investment is likely to perform may mislead a customer; but this is unlikely to be discovered within three years.
Developments so far
The Ministry of justice is now preparing a Cabinet paper proposing the introduction of a Limitation Defences Bill. This Bill allows the limitation period to be extended beyond three years in certain circumstances, in particular where the claimant (the consumer) shows that they did not know that an act of damage had occurred. The Bill would repeal section 43(5) of the Fair Trading Act rather than amend the Fair Trading Act.
The Bill, however, only applies to civil proceedings. So we are considering whether an amendment is needed to the Fair Trading Act limitation period for criminal proceedings (section 40(3)), to keep it in line with the limitation period for civil action.
Action timeframe
We will be reporting on a limitation period for criminal proceedings by the end of the 199611997 year.
Redress Through The Disputes Tribunals
Effective means of redress for consumers is of major importance in helping markets work effectively. Through redress mechanisms, consumers can exert pressure on traders and ensure that they perform more efficiently. Providing redress is also of benefit to the industry itself since it provides invaluable information on what problems are being caused by particular industry practices.
The issue
Developments so far
As a result of our review, the Department of justice (as it then was) obtained Cabinet approval for further work to be carried out in four key areas:
During 1995 the newly established Department for Courts carried out further work on these issues, including comprehensive consultation with consumer and community groups.
The establishment of a consumer charter was incorporated in a separate project focusing on the development of a consumer charter for the entire court system. While this project was due for completion by June 1996, we understand from the Department for Courts that it has been delayed.
Cabinet approved the increase in both monetary and substantive jurisdiction. Disputes Tribunals will he able to hear:
These changes form part of the Courts and Criminal Matters Miscellaneous Bill which is yet to be introduced into the House.
Cabinet decided, however, not to establish the position of Principal Referee. This decision (in April 1996) was disappointing, as the position had the potential to deal with a wide range of matters such as administrative inconsistencies, better training of referees, and liaison with community groups. Some consumer groups. such as the Citizens Advice Bureaux, have said they will raise their concern at the &gloss" of this position at the select committee stage of the Courts and Criminal Matters Miscellaneous Bill.
The Department for Courts is looking at alternative ways of developing a position that could fulfil some of the tasks envisaged for the Principal Referee. They are currently working on a proposal which includes setting up a Council of Referees to oversee the operation of Disputes Tribunals as a whole.
We are working on a policy position about the Principal Referee. This will take into account the Department for Courts' finalised proposals on alternatives to the Principal Referee.
Action timeframe
The timing of our policy position on the Principal Referee is dependent on the Department for Courts releasing its proposals on alternatives to the Principal Referee.
Credit is becoming the primary currency for major consumer transactions. It allows consumers to take advantage of special offers and opportunities to buy goods and services they could not otherwise afford. It allows traders to offer goods for sale that they otherwise could not afford to have in stock. This flexibility strengthens the retail market and contributes to a dynamic and growing economy.
The issue
For example, credit agreements frequently involve considerable amounts of money - the hire (credit) purchase of a vehicle may be the most expensive transaction that a consumer ever makes. Incorrect information given about the true cost of credit can have punitive consequences for the person "buying" that credit.
Credit transactions are also high risk. Consumers may be required to assign their household possessions as security for the agreement, or they may enter into agreements that overcome them financially.
Low-income consumers are especially vulnerable in the consumer credit market.
They are more likely than other consumers to use less-reputable credit products,
many of which are offered by non-mainstream credit providers who have no
incentive to comply with the law and who take advantage of low-income
consumers' need for credit. Low-income consumers are also least likely to be able
to afford appropriate redress.
Given such severity of outcome, it is essential for consumers and traders to have credit legislation which provides clear rules, certainty and fairness. Existing credit law in New Zealand is unclear, inconsistent, and consequently unfair.
Present credit law (the Credit Contracts Act 1981, Hire Purchase Act 1971 and Chattels Transfer Act 1924) shows many of the characteristics of poor consumer law. It is:
Developments so far
In 1995 Cabinet approved some ad hoc amendments to credit laws in the areas of credit advertising, insurance, guarantees, and repossessions. This work was done jointly by justice and Consumer Affairs officials.
One part of these amendments - changes relating to repossessions - has been introduced into the House as the Credit (Repossession) Bill 1996. This Bill, which was introduced by the Minister of justice, brings together all repossessions under the Hire Purchase Act, Credit Contracts Act and Chattels Transfer Act. It improves the protection for consumers by increasing the period of notice before repossession, by establishing reasonable times and methods for repossessions, and by enhancing debtors' rights after repossession. It also puts the statutory notices to consumers into plainer language than previously.
Action timeframe
The Credit (Repossession) Bill is currently before the Commerce Committee.
We intend developing a framework for consumer-credit law during the third quarter of the 1996197 year, and are planning to recommend that Cabinet approval be sought for:
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