Mobile truck shops trawl around low income areas, selling to families who can’t buy from supermarkets and shops.
What can be done to rein in some of the trucks’ exploitative practices which include having buyers sign multiple direct debit forms, misleading advertising, exorbitant prices, and numerous and excessive fees ?
1 Multiple direct debit forms
Some mobile truck shop operators obtain multiple signed direct debit forms from consumers. If buyers cancel one direct debit, the company will activate another one. The Commerce Commission says it is well aware of this issue. Section 12.1(a) of the Responsible Lending Code which took effect on June 6 specifically states lenders should not lodge multiple direct debit forms. A Commerce Commission spokesperson says non-compliance with the code provides a tool for the commission to use.
However, many breaches of the law are not reported to the commission. Comprehensive monitoring and vigorous action will be needed by the commission to put an end to direct debit abuses. In addition, it should be noted the code is not binding.
2 Unexpected payments
Customers who have finished paying off debts sometimes find unexpected payments have been made from their bank accounts to mobile truck shops. A Commerce Commission spokesperson says some contracts have terms stating the company will continue to debit the customer’s account indefinitely so the buyer can build up credit for other purchases. Such withdrawals are accordingly authorised.
“The Fair Trading Act has new rules relating to unfair contract terms that came into force on 17 March 2015, for contracts entered into after that date. The FTA gives the Commission the right to apply to a court to have terms in a contract declared unfair. The Commission considers this type of term of indefinite debiting as the type of term that is at high risk of being an unfair term. Section 11.4(b) of the Responsible Lending Code also specifically states that companies should contact customers when they are close to making their final repayment or as soon as possible after the total amount has been paid. Changes to the [Credit Contracts and Consumer Finance Act] also mean that lenders will be required to send statements to consumers six-monthly, and it is hoped that consumers will have more awareness of the state of their accounts.”
3 Misleading advertising
Mobile truck shops commonly use advertising emphasising how easy it is to buy from them, but failing to draw to consumers’ attention the full costs of doing business with the companies. This includes “Easy to pay,” “No credit check” and “No deposit, no interest.” The Fair Trading Act already prohibits misleading or deceptive advertising. The new lender responsibility principles under the Credit Contracts and Consumer Finance Act additionally require lenders to ensure advertising is not confusing.
Borrowers commonly know only the weekly payments they will make, rather than the total to be repaid. Similarly, they might not understand the annual interest rate as opposed to the daily or weekly rate. The code guidance says lenders should display annual percentage interest rates at least as prominently as the rates for other periods and should state the total amount to be paid as well as the weekly repayment rate. Lenders should no longer advertise they will not take into account borrowers’ circumstances in making lending decisions.
Some mobile truck shops charge delivery fees, establishment fees, administration fees, dishonour or missed fees, cancellation fees, account maintenance fees, field visit fees and other fees which can total hundreds of dollars. Earlier attempts to rein in fees by law have been unsuccessful in many respects. The code has a section on fees. Monitoring will be needed to see whether it is effective in putting an end to some fees and reducing others.
5 High prices
There is no indication that the Government or any agency will take any action to curb high prices. Asked whether it was acceptable for mobile truck shops to sell cans of corned beef for $20, a spokesperson for Commerce and Consumer Affairs Minister Paul Goldsmith said the Government did not control prices in New Zealand.
“Our primary concern is ensuring that consumers are able to know the true cost of an item.”
6 Consumers cannot afford purchases
The new lender responsibility principles under the Credit Contracts and Consumer Finance Act and the Responsible Lending Code require lenders, before entering into agreements, to make reasonable inquiries to ensure consumers will be able to make repayments without substantial hardship. They must also examine the potential borrower’s requirements and objectives. The provisions mean companies should be satisfied that customers will be able to make repayments without undue difficulty and will also be able to pay for necessities such as accommodation, food, utilities, transport and medical expenses, as well as servicing existing debts. It will be some time before the effectiveness of this provision becomes clear.
7 Selling food at inflated prices
Mobile truck shops initially began selling clothes and have subsequently expanded into retailing bedding, toys, appliances, furniture and electronic devices. More recently, some companies in South Auckland have begun selling food. The prices charged are extremely high compared to supermarket prices. Some politicians believe there should be an outright ban on trucks selling food.
8 High interest rates
New Zealand does not have a legal cap on interest rates. Successive governments have refused to legislate to introduce a cap as has been done in many other countries including Australia, most European nations and most American states, Canada, South Africa, Japan and Bangladesh.
9 Difficulty for low income families in buying food and essential household items such as fridges and washing machines
Alternatives to buying from trucks could include more microfinance schemes to make low cost credit available, as well as partnerships between government or community agencies and supermarkets and whiteware retailers to provide goods at affordable prices.
WHAT THE POLITICIANS SAY
MPs – the national view
National’s East Coast MP Anne Tolley
Ms Tolley has met with and written to mayors and councils in the Opotiki, Kawerau and Whakatane districts and believes there is an opportunity “to work together to exclude mobile trucks from preying on our communities.” She says she is happy also to speak to the Gisborne District Council, to ensure the whole East Coast is covered.
“Recent advice I’ve received suggest we can do something within the existing bylaws. My next move is to go back to the councils and look at how we might implement a change.”
Ms Tolley says the informal legal advice outlined options including councils reviewing existing policies to ensure existing bylaws are being enforced, as well as councils working together to develop a common policy on factors to consider when approving or renewing mobile truck licences. The Gisborne District Council has a Mobile Shops and Other Traders Bylaw 2014. One mobile truck shop company has two trucks licensed under the bylaw.
Labour’s consumer affairs spokesperson David Shearer
Mr Shearer states it is a “cop out” to say mobile trucks are a local government issue.
“This is something that should be addressed at central government level.”
He advocates an immediate ban on the trucks selling food, and says there should be compulsory registration and a code of practice. Those businesses which did not comply would not be able to continue operating.
Mr Shearer says it needs to be mandatory for mobile businesses to make it easy for customers to contact them. Truck shops should also clearly spell out exactly how much buyers would pay in total for items if they enter into credit contracts. He is sceptical about the efficacy of credit law changes which took effect on June 6, particularly the general nature of the requirement to check people can afford to repay loans. He says this will not address the real issues posed by truck shops.
Green Party consumer affairs spokesperson Mojo Mathers
The Greens are deeply concerned about the exploitation of vulnerable people by mobile sellers, says Ms Mathers.
“These companies appear to be deliberately targeting our most desperate people. It is great to see the Commerce Commission are investigating this issue and we will keenly watch its outcome. We believe these truck businesses need to be tightly regulated, either by council or central government. It doesn’t matter who’s doing the regulating, as long as it’s happening.”
Maori Party MP Marama Fox
Ms Fox says truck shops target low income families, who can’t see any other way to provide for whanau.
“If you’re desperate for kai, if you’re desperate for clothes for your children, to get bedding and blankets, you go into these places.
She advocates comprehensive regulation of mobile truck shops, saying that councils need to act as they have a better understanding of local conditions than central government does. The trucks should be banned from selling food; their operations should be restricted to areas such as shopping centres; interest rate caps should be introduced; and the availability of credit should be regulated.
Councils – the local view
Auckland Mayor Len Brown
“Any sales practices that impact negatively on the wellbeing of at risk Aucklanders are obviously of concern and we are keen to work with the government and other agencies on such issues,” says Mr Brown.
Auckland Councillor Alf Filipaina
Mr Filipaina says the trucks prey on those who do not have money. A bylaw could be on the cards, but he says the key to effective action is enforcement and central government is accordingly better placed to act than councils are. Mr Filipaina says the Ministry of Business, Innovation and Employment has powers under legislation. He has met with a MBIE manager to discuss his concerns and ongoing conversations are taking place between the ministry and community groups.
Puketapapa Local Board chair Julie Fairey
“Yes we have these trucks in my community and I think they are parasites. Not only do they have negative financial impacts of the people who have to buy from them they also encourage and enable isolation. I can’t think of any legal mechanisms such as bylaws that Council could use, but it would be helpful for central government to include these trucks in their work on loan sharks as the relationships there seem to be particularly concerning,” says Ms Fairey. She would like to see community groups in Puketapapa Mt Roskill challenging the trucks by using creative methods to make it unpalatable for them to operate.
Auckland Council Manager Social Policy & Bylaws Michael Sinclair
Mr Sinclair says a bylaw taking effect on July 1 will regulate trading activities in public places, but it does not address unscrupulous practices and will not apply to mobile traders who conduct transactions on private property.
“Unfortunately most of these operators are aware of the private vs public places dichotomy and the limitations of council bylaws to address this. At a local government level, we are only able to deal with issues that impact on the public places.”
Opotiki Mayor John Forbes
Mr Forbes says he has little detailed knowledge about the trucks but, if someone can buy an item for $10 at K-Mart and is charged $35 by a mobile shop “it’s difficult to see the justification for it.” He believes a local solution is crucial and anticipates that his council will work with the neighbouring Kawerau and Whakatane districts on a timeframe for bylaw development. He says it will be important to ensure that mobile shops do not get pushed out of one area and reappear elsewhere.
Whakatane Mayor Tony Bonne
A spokesperson says Ms Tolley has raised the possibility of the Eastern Bay council developing a bylaw to ban mobile traders who charge high interest rates to low income purchasers.
“It’s too early to comment on how or if such a bylaw would work, because it has yet to be analysed and has not yet been formally considered by the three local councils, either individually, or severally through our regular Eastern Bay Joint Committee structure.”