Friday, 16 November 2007

The Watchdog does maths

Shall I give stores a breather this week? The last few weeks we’ve been going on and on about store credit schemes, about what stores are meant to do to help us, about their legal obligations and, most importantly, about how almost all stores are totally ignoring some of their obligations.

A few weeks ago we wrote to all the stores we thought might sell things on credit asking them to explain why they ignore one of the most important rules. This the 33-year old rule that says that if a store offers something for sale on credit then they are obliged to tell us, “in characters of similar size” what the total credit price will be. If it’s offered for sale for P199 for cash and the total credit price turns out to be P1,752 then they must tell us that.

By the way, that’s a real example. I know it sounds unbelievable but there is a store that is advertising a glorified bed sheet for exactly those amounts. That’s a staggering P1,553 in credit charges. Buy this sheet on credit and you’ll pay nearly nine times as much as your neighbour who buys it for cash.

I don’t know where to begin to express how dreadful this is. I firmly believe that government has no role in telling you and me what we should and should not buy, nor what we should pay for non-essentials like bed sheets. But this is genuinely scandalous. The store should be ashamed of itself, firstly for charging such astronomical amounts in credit charges, secondly for not being perfectly open about the cost and lastly for even thinking of selling something so cheap on credit at all.

We’ve still only had a couple of responses to our letter but rest assured we’re going to post all the responses we’ve had from the stores on our web site so you can see who’s prepared to be open about their credit schemes.

Back to the rules. As I’ve mentioned before our South African cousins now have a new law called the National Credit Act. The Regulations that emerged from this Act are now in force and one of them says that all adverts must state the total credit price. Fair enough. But we’ve had the same rule for 33 years. The Control of Goods (Marking of Goods) Regulations 1974 says exactly the same thing. So why are stores just ignoring our laws?

There we were, walking around town last week when we stumble across another furniture store full of posters advertising their products. Strangely one poster advertised some things in Pula and others in Rand which is fair enough I suppose. However the most curious thing was that the Rand-priced items showed the full credit amount but the Pula-priced ones didn’t.

But being a strange creature with a slightly mathematical brain I noticed something odd. Literally odd. They advertised a cellphone that was available for cash at R1,299.95. They then stated that on credit it would cost a deposit of R130 and then 24 instalments of R97. Now before I go any further, take a look at those numbers and if you think about it you can see that whatever the total repayment turns out to be it has to be an even number. The maths cannot result in an odd number. So how come the total credit price they state is R2,311?

The charitable explanation is that they must have failed their maths exams. Otherwise it might seem like they’re trying to deceive us. He real credit price is R2,458. 130 + 24 x 97 comes to R2,458. So maybe they’re just not very good at maths?

Then the advertisement shows the credit percentage rate. Perhaps they were off sick the day the teacher did percentages? They claim that this an interest rate of 27.5%.

No, it’s not.

The total “extra” you pay buying this phone on credit is R1,158. That’s payable over 2 years so each year you’ll pay R579 in credit charges. 579 expressed as a percentage of the purchase price of R1299 is 44.5%.

So where do they get the figure of 27.5%? I suspect that this is the interest rate they have decided to tell us they charge. What they then do is exclude a whole lot of other charges from the calculation. All those “handling”, “insurance” and “miscellaneous” charges are simply ignored.

In parliament in the United Kingdom MPs aren’t allowed to accuse each other of lying. It’s judged to be “unparliamentary language”. However Winston Churchill once got around this by referring to something as being a “terminological inexactitude”.

I’m going to adopt the same approach. Of course the stores would never deliberately lie to us about their credit charges. Of course not. Who would ever think such a thing? It would be unimaginable.

But I do think it’s fair to say that some stores, no names mentioned at this stage, are guilty of a monstrous terminological inexactitude.

In fact it us, their customers, who are lying. We’re lying down and taking it.

This week’s stars!

  • Andries at Woolworths at Kgale Shopping Centre for going out of his way to help a customer with a smile.

We still have Wimpy vouchers to give away. Our friends at Wimpy have donated lots of P50 vouchers for us to give away to our readers. All you have to do is nominate someone who you think delivers excellent service and YOU get a Wimpy voucher. They get celebrated here in Mmegi, we’ll write to their Managing Director praising them and they get to come to our next Consumer Watchdog Party to be celebrated by you-know-who.

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