'One Law - One Door' For Consumer Transactions

Hon Heather Roy speech to the Combined Ministry of Consumer Affairs Stakeholders meeting; Ministry of Economic Development, Bowen St, Wellington; Monday, November 30 2009.

Ladies and Gentlemen,

Thank you for the invitation to speak to you today. As industry and consumer representatives, and stakeholders of 'Consumer Affairs', you are well placed to listen to and give me constructive feedback on the issues I'm going to address. I welcome the chance to update you - or, rather, give you a progress report on my 'One Law - One Door' initiative.

At the beginning of the year I had a planning session with my Consumer Affairs officials and outlined my priorities for 2009 and through to the next election. Senior staff at the Ministry initially wondered what it would mean to have an ACT Minister. I've always thought it both pleasing and appropriate that this portfolio is held by an MP from ACT - a Party whose roots and title are found in the Association of Consumers and Taxpayers. I'd like to think that we have been consistent, and that my goals and objectives have translated into decisions that are easily able to be predicted.

It was at this planning session that I first spoke of my 'One Law - One Door' plans. I've been delighted with the way my Ministry of Consumer Affairs officials have listened and adapted quickly to my early thoughts, and with their enthusiasm for new projects being proposed. After a year in the job a round of thanks is timely.

Much work has been going on under the National/ACT/Maori Party Government in the area of Regulatory Responsibility. This started before the election with the Regulatory Responsibility Bill - a Private Members' Bill in the name of Rodney Hide. The provisions included in this Bill sought to reduce the amount of legislation and ensure that bad laws don't get passed. I have used the principles of this Bill as a guidepost in my governance of Consumer Affairs. Provisions included a regular review of all legislation to ensure it is still relevant, and a test for new laws being proposed through such questions as: what is this law for? What will the cost of implementing this law be? And what are the unintended consequences likely to be?

It is often mistakenly thought that consumers are just people purchasing goods or services. While it shouldn't be forgotten that businesses are consumers as well, there has been a trend toward an 'us and them' approach to legislation where the customer must somehow be 'protected' from potentially bad business. There are, of course, as many customers deceiving businesses about their credit-worthiness - or intent to actually purchase - as there are businesses withholding information about goods or services.

References about consumer confidence are easily found. In my view this means that the consumer is confident they have access to enough information to make their purchase decision, and that suitable remedies are available if things go wrong. It is possible, however, for a consumer to be over-confident and make inappropriate choices - for example: the raft of prospectuses, ratings and analyst reports did not help those who have lost out in the last couple of years in the collapse of finance companies.

Effective consumer laws help to create a competitive business environment in which consumers can transact with confidence and honest businesses compete on a level playing field. However, like other business regulation where consumer laws do not achieve their objective or are no longer relevant to the way the market operates, they can be a drag on the innovative potential of businesses.

With all of this in mind my planning began from the premise that simplicity is the key to effective market activity. I proposed that Ministry staff explore a simplification programme, which I called 'One Law - One Door'. The 'One Law' refers to a goal of a principle-based piece of consumer-supplier legislation similar to the approach found in the Privacy Act. My instructions were to review the around a dozen pieces of consumer law for their relevance to today and their ability to be relevant into the future as many seem to have been overtaken by time or technology. Then, how could these be merged to cover what is a relatively simple process of transaction with a buyer, a seller and a guiding set of principles to cover a sale scenario?

'One Door' refers to a simplified complaints apparatus rather than a system that leaves the consumer to negotiate the host of complaints and disputes tribunals, ombudsmen and so on that currently serve to confuse the applicant while sometimes adding cost to the taxpayer.

Both projects are making good progress and it is 'One Law' that I'd like to update you on today.

Before I delve into the detail however I'd like to share with you some of the results from the Ministry's National Consumer Survey 2009 (www.consumeraffairs.govt.nz/consumersurvey-2009.pdf), firstly because I think you will all find the results interesting and relevant to the areas in which you work, but also because it has been instructional on many of the issues we are examining in the 'One Law' work programme. This survey was conducted between June and August this year to gain insight into consumer issues including New Zealanders understanding of their rights, awareness and use of information sources when in a dispute, how to seek redress, and action taken to resolve problems, issues and disputes. A similar survey was carried out in 2005 and the comparative data is also very useful.

The good news is that the survey showed that New Zealanders in general have a fairly good understanding of their consumer rights - in particular consumers know they are entitled to have faulty goods repaired, replaced or refunded. Two-thirds could name at least one piece of consumer legislation.

The survey also indicated that confidence in New Zealand law amongst consumers is strong. Most believe that current law will protect them if problems with transactions arise.

New Zealanders are generally aware too of services and organisations providing consumer advice, in particular the Citizens Advice Bureau (41 percent, up from 33 percent in 2005) and Consumer NZ (24 percent). A notable shift since the previous survey in 2005 is that 14 percent of consumers surveyed cited television programmes as a source of information or advice. This has increased from just six percent in 2005 and reflects the popularity of prime time television shows like 'Fair Go' and 'Target'.

What consumers didn't know has provided insight into areas where work must be focussed. It is clear from the survey that consumers don't fully understand the protection provided by the Consumers Guarantee Act. Another area of confusion is that of extended warranties. In general these do not give any additional rights to those provided under the Consumer Guarantees Act.

The survey also highlighted a number of knowledge gaps. Those with least knowledge are more likely to be female, under 30 or over 65, employed in a labouring role, and identify with an ethnic group other than NZ European.

So, in summary, issues that should be addressed include increasing the awareness of consumer laws and rights; providing greater levels of information for consumers through consumer advocacy or word-of-mouth as family and friends were cited as an important source of advice; the development of the 'One Door' complaints procedure to facilitate advice and assistance to consumers; and increasing awareness about the sale of extended warranties.

Overall results of the survey were encouraging but also served to further support a 'One Law - One Door' policy. We know from the National Consumer Awareness Survey 2009 that consumers make a wide variety of transactions - ranging from the traditional retail experience, to using more modern purchase platforms such as the internet and buying from TV infomercials. With a myriad of transaction types now taking place it is important that consumers are aware and protected through comprehensive and consolidated legislation, rather than the current piece-meal approach.

There are 11 laws that the Ministry of Consumer Affairs is responsible for. Each is being reviewed looking at its history and original purpose, its ongoing relevance and if still relevant, whether it is sufficiently up to date for consumer transactions of today. Each is also being examined to determine its overall effectiveness and its enforceability.

The 'One Law' work covers:

* Fair Trading Act 1986,
* Consumer Guarantees Act 1993,
* Door to Door Sales Act 1967,
* Lay-by Sales Act 1971,
* Unsolicited Goods and Services Act 1975,
* Auctioneers Act 1928,
* Weights and Measures Act 1987.

One example of why the review is necessary is the Auctioneers Act. This has an interesting background, namely the reasoning behind the licensing fee. It is a quirky piece of legislation that came about in the late 1920s, when livestock auctions were held frequently. The pure volume of livestock auctions created costs to local authorities in cleaning the "mess" from the streets following outdoor proceedings. Obviously things have moved on since 1928 and the question of licensing of auctioneers needs to be reviewed. Certainly the current fee and how it is distributed should be reassessed to better suit a different time and age. On-line auctions, for example, are currently causing some concern - something not even imaginable in 1928.

Three other laws sit within the Commerce portfolio but are significant pieces of legislation affecting consumer transactions. The decision has been made to also include them in the review:

* Carriage of Goods Act 1979,
* Sales of Goods Act 1908, and
* Sale of Goods (United Nations Convention) Act 1994.

A separate review occurring in parallel covers:

* Credit Contracts and Consumer Finance Act 2003
* Credit (Repossession) Act 1967.

Consumer law not included in the review is:

* Motor Vehicle Sales Act 2003 (just recently reviewed)
* Part 3 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008

The objectives of the review are two-fold: to define the principles underpinning New Zealand Consumer laws which will assist in the second objective of simplifying and consolidating existing consumer law.

To make the simplified 'One Law' a reality, initial thinking is to consolidate much of the current legislation into one strong, clear piece of law; in essence creating an enhanced Fair Trading Act. Under consideration is the purpose statement:

"To promote consumer well being by fostering effective competition and enabling the confident participation of consumers in markets in which both consumers and suppliers trade fairly and in good faith."

This statement places a responsibility on both the supplier and the consumer to undertake fair and honest transactions.

An enhanced Fair Trading Act would thus aim to encompass legislation covering the following five areas, into 'One Law':

* Unfair commercial practices
* Selling and duress
* Product safety
* Information to assist consumer decision making
* Trader obligations

The enhanced Fair Trading Act would be complemented by the Consumer Guarantees Act. Sitting alongside these two laws could be an enhanced Credit Contracts and Consumer Finance Act (CCCFA) - incorporating the Credit (Repossession) Act - and the Motor Vehicle Sales Act.

The Weights and Measures Act could also sit alongside or potentially be a separate part of an enhanced Fair Trading Act.

The ongoing work towards a Single Economic Market (SEM) with Australia is playing an increasing role in the development of our legislation here. I am mindful of the six operational objectives the Ministerial Council of Consumer Affairs has agreed to in regard to consumer policy. These principles are:

* To ensure that consumers are sufficiently well-informed to benefit from and stimulate effective competition;
* To ensure that goods and services are safe and fit for the purposes for which they were sold;
* To prevent practices that are unfair;
* To meet the needs of those consumers who are most vulnerable or are at the greatest disadvantage;
* To provide accessible and timely redress where consumer detriment has occurred; and
* To promote proportionate, risk-based enforcement.

The above principles could be used to underpin any changes to New Zealand's consumer laws.

To complete the picture I'll also speak briefly about progress with the 'One Door' policy. What I envisage is the 'One Door' acting as a portal - one place to go to seek advice when a consumer transaction doesn't progress as expected. We have a Disputes Tribunal, disputes resolution schemes, ombudsmen as well as many organisations doing a great job in assisting those who know where to find them. However many consumers remain confused about their options. Too many, and most often those least able to absorb a financial loss just give up and do nothing. 'One Door' aims to be the one place to go first to access the advice on "where to from here".

Again simplicity is the key. I expect to be in a position to progress 'One Door' further in the New Year.

Achieving a 'One Law - One Door' policy will be a significant positive step forward for consumer law in New Zealand. Providing effective consumer law will help to further foster a competitive business environment in which consumers can transact with confidence and honest businesses compete on a level playing field.

We still have many steps to take before 'One Law - One Door' is achieved, but with the work plan in place my goal is to have this new legislation to rationalise consumer laws within the Parliamentary process by the next election.

Thank you again for the invitation to speak to you today. I look forward to hearing your comments and your participation when the time for consultation arrives.