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consumer

Can you stop a credit card payment for faulty goods?

Key Takeaway

In New Zealand, consumers have rights under the Consumer Guarantees Act 1993 and Fair Trading Act 1986 if goods are faulty. While these laws outline remedies from suppliers, stopping a credit card payment (chargeback) is typically governed by credit card agreements and scheme rules. However, a supplier's breach of these consumer laws can provide grounds to request a chargeback from your bank.

Understanding Your Rights for Faulty Goods in New Zealand

When goods purchased with a credit card are faulty, consumers in New Zealand have rights under consumer protection legislation. While these laws primarily govern the relationship and obligations between a consumer and a supplier, they also form the basis for pursuing remedies, which may include the process of disputing a credit card payment.

Consumer Guarantees Act 1993

The Consumer Guarantees Act 1993 (CGA) provides a set of automatic guarantees for consumers when they buy goods or services from a supplier ordinarily in the business of selling those goods or services. A consumer is an individual who acquires goods or services for personal, domestic, or household use [Source: Consumer Guarantees Act 1993, s 2]. A supplier is a person who in trade supplies goods or services to a consumer [Source: Consumer Guarantees Act 1993, s 2].

Key guarantees for goods include:

  • Acceptable quality: Goods must be fit for all the purposes for which goods of that type are commonly supplied, acceptable in appearance and finish, free from minor defects, safe, and durable [Source: Consumer Guarantees Act 1993, s 6].
  • Fitness for a particular purpose: If the consumer makes known a particular purpose for which they require the goods, the goods must be reasonably fit for that purpose [Source: Consumer Guarantees Act 1993, s 7].
  • Match description: Goods must correspond with any description given by the supplier [Source: Consumer Guarantees Act 1993, s 8].
  • Match sample or demonstration model: If goods are supplied by reference to a sample or demonstration model, they must correspond with that sample or model [Source: Consumer Guarantees Act 1993, s 9].

Remedies for Faulty Goods under the CGA

When goods fail to comply with a guarantee, the consumer has a right to redress from the supplier [Source: Consumer Guarantees Act 1993, s 18]. The available remedy depends on whether the failure is a minor or substantial failure.

  • Minor Failure: If the failure can be remedied easily, the supplier can choose to repair the goods, replace the goods, or refund the purchase price [Source: Consumer Guarantees Act 1993, s 20].
  • Substantial Failure: A failure is substantial if, for example, the goods are significantly different from their description, are unsafe, or cannot be made fit for purpose within a reasonable time [Source: Consumer Guarantees Act 1993, s 21]. In the case of a substantial failure, the consumer can choose to reject the goods and obtain a full refund or a replacement of the same type and value, or keep the goods and claim compensation for the reduction in value. The consumer may also claim for any loss or damage resulting from the failure that was reasonably foreseeable [Source: Consumer Guarantees Act 1993, s 23].

Fair Trading Act 1986

The Fair Trading Act 1986 (FTA) prohibits misleading and deceptive conduct by traders (persons in trade) [Source: Fair Trading Act 1986, s 9]. It also prohibits false or misleading representations about goods or services [Source: Fair Trading Act 1986, s 13] and unsubstantiated representations [Source: Fair Trading Act 1986, s 12A]. If a trader breaches the FTA by, for example, making false claims about the quality or features of goods that are subsequently found to be faulty, consumers may have grounds for action under this Act.

While the FTA does not provide for a direct remedy like repair or replacement, a court may make various orders if a trader breaches the Act, including ordering the trader to pay compensation to the injured person [Source: Fair Trading Act 1986, s 43].

Stopping a Credit Card Payment (Chargeback Process)

The ability to stop a credit card payment, often referred to as a chargeback, is not directly legislated by the Consumer Guarantees Act 1993 or the Fair Trading Act 1986. Instead, chargeback processes are typically governed by the terms and conditions of a consumer's credit card agreement with their bank or financial institution, and by the rules of the relevant credit card scheme (e.g., Visa, Mastercard, American Express).

However, the consumer rights established by the CGA and FTA provide the legal grounds for why a consumer may be entitled to a refund from a supplier. If a supplier fails to provide a remedy as required by the CGA for faulty goods, or if the goods were sold under misleading pretenses in breach of the FTA, these circumstances can form the basis for a consumer to initiate a chargeback request with their credit card provider.

To initiate a chargeback, the general process involves:

  1. Contacting the supplier first: Attempting to resolve the issue directly with the supplier as required by your credit card agreement.
  2. Contacting your bank or credit card issuer: If direct resolution with the supplier is unsuccessful, the consumer can contact their bank or credit card issuer to dispute the transaction. The bank will typically require details of the purchase, the fault, and attempts made to resolve the issue with the supplier. The bank will then review the claim against the card scheme rules and evidence provided.

The credit card issuer acts as an intermediary, and if the chargeback is successful, the transaction amount is reversed, and the funds are returned to the cardholder's account. It is important to note that specific time limits and conditions apply to chargeback requests, which are determined by the credit card scheme rules and the cardholder's agreement.

When to Seek Independent Legal Advice

If navigating complex disputes involving faulty goods, supplier non-compliance, or credit card chargebacks becomes challenging, seeking independent legal advice is prudent. A legal professional can assess the specific circumstances, explain the available options, and guide individuals through the appropriate legal avenues. For free initial legal advice, individuals can consult Community Law Centres throughout New Zealand [https://communitylaw.org.nz/].

Key Resources