DEALING TO MOBILE TRUCK SHOPS
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.
(*This article is slightly outdated as written in March 2015.)