Free Subscription

  • Access 15 free news articles each month


Try one month for $7.5
  • Unlimited access to news,insights and opinions
  • Quarterly and weekly magazines
  • Independent research reports and forecasts
  • Quarterly webinars with industry experts
  • Q&A with retail leaders
  • Career advice
  • 10% discount on events

Court declares Home Direct terms unfair

The High Court on Tuesday ruled that the terms of a payment scheme operated by Home Direct for nine years were unclear and unfair to consumers, who lost more than $644,000 over the life of the scheme.

This is the first time a Court has made a declaration under the Fair Trading Act that terms in a standard form consumer contract are unfair, the Commerce Commission said.

The Commission is now urging Home Direct customers to contact the business to see if they are eligible for a refund.

What Home Direct did wrong

Home Direct is an online retailer that sells consumer goods from brands such as Samsung, Kambrook and Under Armour on deferred payment terms. Customers are required to make regular payments towards the goods and pay interest on the balance through a facility called a “lifestyle account”.

Prior to July 2018, when customers signed up to the account, they used to be invited to opt in to something called a “voucher entitlement scheme”. Under the scheme, customers would continue to make direct debit payments to Home Direct after they had paid off their goods, and could use the money to purchase more goods from Home Direct.

But the terms of the contract stipulated that the “vouchers” were not refundable for cash and, if they were not used to purchase more goods, they would expire after 12 months and Home Direct would retain the money. The only way to avoid forfeiting funds was to purchase more goods from Home Direct.

Many thousands of customers were affected by the scheme, which operated from 2009 to 2018. More than $644,000 was forfeited to Home Direct during that time.

“We recommend that Home Direct customers who think they may have subscribed to the scheme during this period should contact Home Direct to check whether they had vouchers which were forfeited,” said Commission chair Anna Rawlings.

“Insufficiently clear”

The High Court at Auckland Justice Muir said that for the period April 1, 2017 to December 14, 2017, the terms and conditions relating to refunds and expiry of vouchers were “insufficiently clear” and “the absence of transparency adds a further layer of unfairness.”

He said “the scheme did not provide any corresponding benefit to customers” such as a discount on the purchase of goods and that it was in a sense “one-way traffic” in the direction of Home Direct.

On top of this, some customers who did not opt into the voucher scheme had their credit balance converted to vouchers without their authority, and in some cases vouchers subsequently expired. This error occurred throughout the life of the scheme, from 2009 to 2018. And while the vouchers were supposed to be capped at $1500, some customers lost as much as $4600.

Home Direct has attributed this to a software error.

6,000 customers refunded so far

Home Direct co-operated with the Commerce Commission throughout its investigation and consented to the declarations being made, the Commission said in a statement.

The retailer has credited customers over $133,000 and agreed to refund any customers who had vouchers which were forfeited from March 17, 2015, when the unfair contract term provisions became law, and the closure of the scheme in July 2018.

About 6,000 customers have already been credited or refunded a total of $22,000 as a result of these errors.

Home Direct has also made a donation of $35,000 to a charity working in the credit sector, reflecting the amount it has not yet been able to refund or credit to affected customers. Those customers can still seek refunds or credits by contacting Home Direct.

You have 7 free articles.