Friday 5 October 2007

Illegal store credit

At Consumer Watchdog we are very fond of stores that offer credit schemes. Well, perhaps not exactly fond of them but they certainly very generously give us an enormous number of cases to investigate. Their delightful credit schemes with all those wonderful hidden charges, deceptive interest rates and nonsensical, compulsory insurance policies provide us with an endless sequence of customers who feel they have been abused, insulted and generally ripped off.

So in return for giving us all those juicy cases here's a present, a reward for stores. A series of suggestions for them. Some are just recommendations, some are handy hits and one has the full force of the law. I'll leave that juicy one for last.

Firstly let's have some openness and honesty from you. We think that every time you invite customers to sign up for a credit purchase you should give them a leaflet that describes, in very simple terms that everyone can understand, not only their obligations under the agreement but also what they can expect from you. Ideally it should be in both English and Setswana so everybody can understand it.

Also why don't you be completely honest about things like interest rates? Calculate them correctly. Tell your customers, the people who give you their hard-earned money, exactly how much all the extras are as a percentage of the cash price. If the cash price is P3,000 but using your credit scheme they'll end up paying back a total amount of P5,000 then be honest about the extra P2,000 and tell them that it comes to 67% of the cash price. If they're paying that back over two years then tell them it's an Annual Percentage Rate of 33%.

Also, let people take the contract away with them to look at overnight. The last time we checked most stores told us that customers weren't allowed to take agreements away to consider. We can only see the contracts when we sign them. That's just outrageous. What do they have to hide? We're going to do a full survey of stores and we'll report what each one of them says. Then you'll be able to see which stores are open about their agreements and which ones have something to feel ashamed about.

Please don't hide things from your customers. When you insist on including things like credit protection insurance in the agreement be honest with us. Don't tell us that it's to protect us against loss when in fact it's to protect you against us defaulting on our repayments. Don't include things like "cartage", "handling charges" or "maintenance contract" which just seem like an excuse to charge the customer lots more money.

Then there's the big one. The one that has the force of the law behind it. The one you are ALL ignoring, the one that is actually illegal. Against the law. Not allowed. Forbidden.

It's our latest discovery. It's not as big as Newton discovering gravity but we're rather proud of it. However we're a little ashamed that we didn't discover it earlier.

It's called the Control of Goods (Marking of Goods) Regulations 1974. This is a set of rules about how things that are offered for sale must be marked. It talks about how prices, sizes and weights must be displayed, how discounts must be identified and how they can use abbreviations like "½ doz" and the obvious ones like "P" and "t".

Hidden away in Section 6 of the Regulations is the good bit. This remarkable little section talks about goods that are sold "on hire-purchase terms or by way of credit-sale". It states very simply that anything sold on credit or hire purchase must show the following details:

"(a) the amount of any deposit;

(b) the amount of each instalment;

(c) the frequency of instalments;

(d) the total number of instalments;"

So far so good. If you look at anything advertised for credit sale they always show these details. However, then you get to the best bit. My favourite, item (e).

"(e) the total amount to be paid by way of deposit and instalments."

Yes, the law demands that they tell us on the label what the total repayment will be. But when was the last time you saw a store state in their advertisements what the total amount would be? I don't think I've ever seen it. I've checked as thoroughly as I can and it looks like these regulations have never been repealed so are still in force. If this is correct all the stores who sell things on credit are acting illegally if they don't tell us the TOTAL amount to be repaid. Yes, illegally.

So here's my final tip to stores. Stop breaking the law and start acting legally.

I'm going to start reading all the other laws and regulations that seek to protect the consumer. In the next few weeks we're going to start explaining them in this column and on the radio. The Consumer Protection Act states that the government must "disseminate information to enable consumers to acquire knowledge of basic consumer rights and obligations and the skills needed to make informed choices about goods and services". At the moment it's simply not happening so Consumer Watchdog and Mmegi are going to do it instead!

By the way, in case any stores that have credit schemes don't read this column we're going to write to every one of them and suggest very politely that they may be breaking the law and ask them what they are going to do to clean up their act.

I wonder if they'll say thanks?

No comments: