If you’re standing at the counter about to fork out thousands of dollars for the latest flat screen television, you want to know if it suddenly breaks you’ll be covered.
Chances are it won’t be long before sales staff spruik the benefits of paying a little bit extra for an extended warranty.
But is an extended warranty worth the extra cash?
That’s a question being raised in a new class action against retail giant JB Hi-Fi.
New lawsuit on extended warranty
JB Hi-Fi is one of the country’s best-known retailers, with sales at its Australian stores topping $6.5 billion last financial year.
The lawsuit from Maurice Blackburn alleges JB Hi-Fi has been selling extended warranties that are worthless or of little value since 2011.
“What we’re alleging in the class action is that JB Hi-Fi has been selling extended warranties that essentially offer Australian consumers the same thing as what they already get for free under the Australian Consumer Law,” said Miranda Nagy, principal lawyer for Maurice Blackburn.
The case was lodged in the Victorian Supreme Court on Friday, and seeks compensation for customers who signed up for ‘extended care’, ‘customer care’ or ‘extra care’ plans.
What do consumer laws cover?
Central to the case will be basic legal rights called ‘consumer guarantees’ that you get when buying a product.
That includes the right to get a repair, replacement or refund if there’s a problem within a reasonable period of time after purchase, even after a manufacturer’s warranty has expired.
Under Australian Consumer Law, the product must be of acceptable quality, not have defects, be safe, durable and fit for purpose.
The lawsuit claims JB Hi-Fi broke the law by using misleading or deceptive conduct or unconscionable conduct when selling the extended warranties.
Ms Nagy said she believed the retailer had misled shoppers about their value.
“JB Hi-Fi’s warranties never lasted more than three to six years after the date of purchase,” she said.
“So when you think about buying, for example, a $2000 fridge, you’re expecting a fridge like that … to have a much longer life than six years.
“Australian Consumer Law remedies were likely to last longer in most cases.”
Ms Nagy estimated the class action could cover hundreds of thousands of customers who had paid millions of dollars for extended warranties, some of which she said were “incredibly expensive”.
And while this case is focused solely on JB Hi-Fi, Ms Nagy said it was “very far from being the only retailer that sells products of this nature”.
Has JB Hi-Fi responded?
JB Hi-Fi has declined to comment on the case.
The wording of extended warranties sold by JB Hi-Fi state that they do offer benefits that are not already available to consumers.
One stated the warranty provided “certainty as to the period of coverage and the remedy you will receive”.
Other examples provided in JB Hi-Fi’s brochures tout “additional” protection against mechanical and electrical failure.
Maurice Blackburn’s case alleges some brochures failed to include important information about how the basic consumer law protections compared to those offered by extended warranties.
Among the key details it is claimed JB Hi-Fi did not make clear:
- the right of the customer, not JB Hi-Fi, to choose a remedy in certain situations
- cover for some defects
- the right to a monetary refund, not just store credit.
What do consumer groups say?
Margaret Rafferty, from consumer group CHOICE, said extended warranties “very rarely” offered value for money.
Last year, CHOICE did a mystery shop of 80 JB Hi-Fi, Harvey Norman and The Good Guys stores and found most sales staff were misrepresenting consumer rights.
“In 71 per cent of cases they misrepresented the rights of a mystery shopper about what would happen if a product broke down and used the opportunity to try to sell us an extended warranty,” she said.
“They gave us excuses such as, ‘If it’s over two years, you have to pay for repairs yourself.’ That’s not right.
“They told us that, ‘After a manufacturer’s warranty, there’s nothing we can do.’ That’s incorrect.
“It was really quite shocking to see how poorly the rights of consumers were represented by the salespeople.”
The Australian Competition and Consumer Commission (ACCC) said people should be aware that a business or salesperson could get a commission for selling you an extended warranty and consumer guarantees applied regardless of any warranties.
What do retailers say?
Paul Zahra, from the Australian Retailers Association, has defended the value of extended warranties.
“Many shoppers prefer extended warranty just purely for the peace of mind,” Mr Zahra said.
“Extended warranties can often add … longer life to a product.”
He said retailers needed to make explicitly clear what extra rights they were offering.
“There’s no doubt if there’s a crossover between consumer law or manufacturer’s law and the extended warranty is just restating that, then that’s not really in the spirit of actually an extended warranty,” he said.
JB Hi-Fi Group, which also owns The Good Guys, declined to comment.
When contacted for comment, Harvey Norman said it was unable to provide a considered response to the claims made by CHOICE by the ABC’s deadline.
What are your rights as a customer?
Ms Rafferty said your entitlement to get a faulty product fixed without having an extended warranty would depend on a number of factors including: whether it was a reasonable period of time, which varies depending on the product, how expensive it was and, crucially, how serious the fault is.
“If you have a minor problem, something that can be quickly and easily fixed, the retailer can decide to repair or replace your product,” she said.
“But if it’s a major problem, for example if the product is unsafe, if it doesn’t do what it should or it has a fault that would have prevented you from buying it, if you’d known about it, you’re entitled to your money back.”
Her advice to people was to know your rights before buying online or in store and if you are considering an extended warranty, ask lots of questions.
“Really drill down to ask questions about what this product gives that they aren’t already covered by,” she said.
“Ask them if you’ll have to pay any extra if you make a claim, find out about the limits on the claim, ask about who’s providing the extended warranty.
“Be really wary of the tactics that the retailers will use, the extra pressure they put on you to convince you [you] need it.”
Have you ever been talked into an extended warranty? Share your experience in the comments section below.
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