Consumer law update needed to combat ‘junk insurance’
Handle My Complaint is urging the Federal Government to protect consumers from so-called ‘junk insurance’ by making the Australian Consumer Law clearer.
Maurice Blackburn Lawyers filed a class action against JB Hi-Fi in the Supreme Court of Victoria last week, claiming that extended warranties offer no benefit to consumers.
With one in three Australians buying extended warranties, Handle My Complaint CEO Jo Ucukalo said they have essentially been paying something for nothing for decades.
“Extended warranties drive the cost of a product up by about 20 percent when they don’t offer buyers any more protection than they are entitled to under Australian Consumer Law,” Ms Ucukalo says.
“The problem is that the law uses the ‘fair and reasonable’ test without providing the necessary detail to quantify what it is. So when you walk into the store, neither you nor the merchant has a timeline to work with.”
For example, if you bought a $500 refrigerator, what would be your expectation of a “fair and reasonable” time before you experienced any issues with it? Would it be less or more than a $5000 fridge?
Expectations of what’s “fair and reasonable” also might differ between generations. Older people are more likely to expect items to last longer, while younger generations accustomed to replacing products such as phones or laptops every few years might be less inclined to worry about an issue within that time frame.
Timeline for consumers
“The Government needs to create a clear table and timeline for consumers so that they know what is ‘fair and reasonable’ under the law. It is all well and good to say that common sense will prevail but it often doesn’t,” Ms Ucukalo says.
“It’s also worth remembering that, whether consumers are paying $500 or $5000 for a product, it can be a significant portion of their income and few people can afford to replace something within a short time. It’s why consumers often feel compelled to pay a bit extra for an extended warranty.”
Our research indicates JB Hi-Fi made $37 million in 2022 from extended warranties, while globally the market is $130.7 billion and growing at 8.6 percent annually.
The court action is a clear signal to the government that they need to make it easier for consumers to understand their rights before they buy a product.
“We want the Australian Competition and Consumer Commission to come out with guidance for key household items, how long is considered ‘fair and reasonable’ for various price points,” Ms Ucukalo says.
Data drives results
Handle My Complaint has been gathering data on this issue for some time as they help individual consumers get redress for faulty products.
“We have built a compelling picture of the number of Australians affected by faulty products and invite consumers with issues to lodge their complaint with us,” Ms Ucukalo says.
“The more voices, the more pressure on the government to address legislation to make it clearer to consumers what their rights are.”
Under Australian Consumer Law, when you have an item with a major fault, you are entitled to choose if you want a refund, replacement or repair as a remedy.
But, as with the ‘fair and reasonable’ test, consumers are often unsure what is meant by a major fault. A good way to know that you’re dealing with one is when you can’t even offer the item for free to a family member or friend.
Manufacturers are also required to have parts available for repairs for a “reasonable length of time”. This is another way that consumers can miss out a remedy because there is no clarity around what is reasonable.
We advise people to seek a refund unless there is a reason, such as sentimental, why you would prefer a replacement or repair.
How to seek redress
If you bought an extended warranty from JB Hi-Fi from 1 January 2011, you can register your interest in the class action by visiting Maurice Blackburn’s website to ensure you are kept up-to-date with progress on the case.
If you have a product that hasn’t lasted the distance, lodge your complaint with Handle My Complaint. We obtain remedies for consumers under the Australian Consumer Law by championing for refunds, repairs and replacements as appropriate. When we obtain refunds for people, we return 92 percent of the refund to them, and retain 8 percent as our service fee.
It’s a quick, easy and affordable way of getting redress that you are entitled to under the law. We capture the data on what product you have purchased, how much you paid for it, when it broke and how long you expected it to last.
We use this data from many consumers to go in and bat for a good outcome with your individual complaint and build a picture that builds a case for government action.
Join others with similar complaints on our platform for group redress.
Watch Jo's segment on Channel 9News to learn more about the extended warranty class action.
