Store credit schemes.
These are the schemes that stores offer that allow you to pay for items over a period of time rather than all up front. There’s nothing particularly strange about such things, it’s how most of us pay for houses and cars after all.
However, they’re not all quite as clear, open and honest as the sort of loan you might get from a bank. Not as cheap either!
If you shop around there are store credit schemes that actually seem quite reasonable. When we researched these schemes a few months ago we looked at what Game had to offer. If you went to Game and liked the TV they were selling for P1,199 for cash you could get it on 2-year credit for P1,536, which worked out as an annual finance charge percentage of only 14%. Searching through the Game literature we couldn’t find any APR higher than about 16%. This actually seemed extremely reasonable to us. However not all suppliers are that reasonable.
At a different store, not very far from Game, we were stunned to find what we think is the highest store credit charge we’ve ever seen. The item in question was a DVD player. If you bought it for cash you would need to pay just P399 which is actually pretty cheap.
However, if you went for the store’s own credit scheme you would pay quite a lot more than P399. Firstly you would to pay a deposit of P95. Then every month for 2 whole years you would need to pay back P88. After 2 years you would have paid back a stunning P2,207. Remember that this is for an item that costs just P399 if you have the cash. That’s an annual finance charge percentage of 227%!
This is truly staggering cost for credit. It’s virtually what you would pay if you went to a so-called micro-lender or a loan shark. We can’t think of any possible excuse for this level of interest. If Game can do it for 16% why can’t they all?
So what’s our challenge this week?
We want stores that offer customers credit schemes to talk to us about setting up a Voluntary Store Credit Charter. We invite stores to sit down with us and help us construct a set of rules that will show us that they care about their customers and that will commit them to certain basic standards.
So what might the Charter contain?
Rule no. 1 – Open and honest credit
Every credit scheme must state in a standard way exactly what the charges will be. Every advertisement should say something like the following:
“The cash price for this item is P4,699. If you choose to pay on credit monthly for 2 years the total repayment will be P10,718. The total annual percentage rate is 64%. No additional charges will be made.”
That last sentence is one of the critical ones. How often have we heard that a price quoted doesn’t include other charges like delivery or compulsory insurance? The price quoted must include everything. Anyway, surely it’s better marketing to give buyers “discounts” if they don’t require delivery or insurance? The key thing is that there must be rules about how percentages are calculated so there can be no funny business designed to confuse customers. Come on stores, are you up to the challenge?
Rule no. 2 – Upper limits
Surely it’s not reasonable to charge more in finance charges than the cost of the product? How can it possibly be acceptable to charge P399 for the DVD player but nearly 5 times more in finance costs?
Surely we can agree to a maximum of 100%? We really should be asked to pay back more in finance charges than the cost of the product. Come on stores, are you up to the challenge?
Rule no. 3 – Written contract
Every time any customers agrees to any form of credit agreement everything MUST be put down in writing. TWICE. Once when the customer is presented with the credit option to think about and again IF he agrees to it. When we researched credit schemes last year we found a store who stated that it was not company policy to give out details of the repayments until the contract had been signed. Not good enough!
This agreement must state every charge, every condition, including what happens if you fail to make a payment and must indicate in terms everyone understands how the amounts are calculated. Also it must state all the rights the consumer has, both the ones dictated by law and the extras the store gives them.
Come on stores, are you up to the challenge?
Rule no. 4 – Cooling off period
We think that the law should include a compulsory cooling-off period. Any credit scheme must include a period after the contract is signed in which the customer can change his mind (Yes guys, it’s not just women that impulse-buy!). During that period the customer has the chance to calm down, make sure he’s done the right thing, pass it by his wife (or her husband) and take a step back if she has a tantrum. Alternatively he should have the right to pay cash instead of paying on credit.
Maybe the customer should have until the product is delivered to change his mind. Obviously if the store tries to deliver the product and the customer then changes his mind he should be liable for he delivery charge but we think he should be able to have some breathing space before he is committed.
Come on stores, are you up to the challenge?
This week’s stars!
- Daniel at the Gaborone Sun for courteous, friendly service.
- Botsnet for taking the time to explain to all their customers that their mail server had been blacklisted because they hadn’t adequately protected it, it then got hijacked and was now sending out spam emails. Oh sorry, that’s wrong. They didn’t do this at all. Forget we mentioned it.
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