A landmark lawsuit against electronics giant JB Hi-Fi over extended warranties has sparked calls for reforms to protect consumers from so-called “junk” insurance products.

JB Hi-Fi was hit with a class action on Monday that alleges it sold “worthless” extended warranties to shoppers for more than a decade, with law firm Maurice Blackburn seeking forced refunds.

It is alleged the retailer added “substantially” to the cost of home appliances and electronics with the warranties, without conveying an additional benefit to its consumers.

That’s because a right to remedy for faulty products already exists for free under consumer law.

Jo Ucukalo, a consumer advocate and chief at Handle My Complaint, called the lawsuit a “landmark case” and said it showed the need for governments to strengthen consumer rights.

She said consumers were often unaware of their rights or fell victim to grey areas in the existing laws that failed to define how long products like fridges and washing machines should last.

“Consumer law has a right to remedy for a reasonable length of time,” Ucukalo said.

“The duration the consumer guarantee applies has always been in contention.”

Lawsuit pushes for refunds

Its alleged JB Hi-Fi sold junk insurance between January 2011 and November 2023, under labels such as “Extended Care Plan” or “Extra Care Plan”.

Maurice Blackburn wants the retailer to refund every single extended warranty it sold over this decade-plus period, in a case that will test the merits of the controversial add-on product.

“These warranties are in most cases little more than a junk add-on to consumers’ purchase of the household goods they actually want,” Maurice Blackburn principal Miranda Nagy said.

“JB’s extended warranties expire just three to six years after purchase, but they add substantially to the cost.

“Our case alleges they added nothing meaningful to the strong rights for repair, replacement or refund under the Australian Consumer Law rights that consumers already enjoy.”

Consumers do not need to sign up for the class action if they’ve purchased an extended warranty from JB Hi-Fi; rather, if the case succeeds, those who have bought one will become eligible for a refund.

JB Hi-Fi said on Monday in a statement to its investors it would “vigorously defend” the case.

“The proceedings seek compensation for loss or damage of an unquantified amount, interest and costs for the lead plaintiff and group members,” company chair Stephen Goddard said.

“JB Hi-Fi takes compliance with its legal obligations very seriously and considers that it has complied with relevant laws at all times.”

Consumer protections lacking

Maurice Blackburn will claim that JB Hi-Fi misled and deceived consumers about their rights under consumer law by telling customers their extended warranties lasted longer and provided additional benefits.

But Ucukalo argued the prevalence of such warranties at JB Hi-Fi and other retailers reflected failures in consumer law itself, with remedy periods not clearly defined under existing legislation.

She said consumers would benefit if those periods were better defined and there was greater awareness that retailers and manufacturers are required to remedy any faulty products.

“What we would like to see is for major appliances to start quantifying what a reasonable length of time is at reasonable price [points],” Ucukalo said.

“How long should a $500 fridge last … or even a $15,000 fridge, what’s fair and reasonable?”

Research by consumer body Choice has found up to seven in 10 Australians wrongly believe that paying for an extended warranty grants them extra protections.

Almost a third have admitted to buying such a warranty over the past two years.