Friday 8 May 2009

The Voice - Dear Consumer's Voice

Dear Consumer’s Voice

Furniture stores are still advertising products for sale on credit without showing the total credit price. Is this legal?

No, it’s most certainly not. We’ve warned stores repeatedly over the last few years of their obligations under 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;
(e) the total amount to be paid by way of deposit and instalments.”

The Regulations even go further and say that these details must be displayed “in characters of similar size”. There really is no excuse for not showing the total cost a consumer faces when they buy something in credit. Really no excuse at all.

So is it possible that the stores simply don’t know about these Regulations? Yes, it’s possible but only if they’re illiterate. We’ve written to the stores several times, we’ve published articles in the newspapers, we’ve been on the radio and on the TV several times talking about it. They all know. To their credit a number have subsequently changed their advertising. Ellerines and Beares changed their advertisements very quickly, others took a little longer but all credit to them for doing the decent thing. Others took a lot longer. We’ve been in LONG correspondence with Game Stores and their various representatives in South Africa about this and they have now finally given a promise that they’ll change soon. However others like our own Furnmart and the South African Supreme Furnishers have just ignored the law.

One store, who to protect their sensitive feelings we’ll keep anonymous, responded to us by politely informing us that they complied with the terms of the South African National Credit Act. How very nice but we have our own laws in Botswana and all of them need to be obeyed in Botswana, not just the ones that are convenient to a foreign chain of stores.

So why do they ignore the law? It’s difficult to tell but it’s probably because they don’t actually want their customers to know how much they’ll end up paying if they buy something on credit. They don’t want you to know that it can cost several times more to buy on credit than it does if you buy for cash. It even costs several times more than getting a loan from your bank to buy the same item. They don’t want you to know that most furniture stores aren’t actually furniture stores. They make most of their money not from selling furniture but instead from lending you the money to buy the furniture. Most furniture stores would be better classified as money-lenders.

Can this be true? Can stores really be making THAT MUCH money from credit? Look at this real example.

We saw an advertisement in a store window for a bedding protector. If you bought this thing for cash it would cost you a mere P199. However if you looked closely at the advertisement it said that if you bought this sheet using their 2-year credit scheme you would pay a deposit of P72 followed by 24 payments of P70. Look at those numbers again and see if you can work it out in your head. Don’t bother getting a calculator to work it out, I’ll tell you.

The total amount you would repay on this item is a staggering, awesome, jaw-dropping P1,752. For something that is on sale for cash for P199! Take off the store’s profit on the cash amount and it’s probably only worth P100. If you do some more maths you can work out that this store is charging a massive, staggering, appalling 390% per year in interest.

That’s a staggering profit.

The silliest thing we see is the items offered for sale on credit, usually electrical items like TVs, DVD players and hi-fis only come with a 12-month warranty. Remember that stores will warranty something for the period they’re virtually certain it will work properly. They know that a DVD player will work for a year. But you pay for them on credit over 2 years. So when it goes wrong after 13 months you’re still paying for something that you can’t use. What’s more you’ll probably end up paying for the replacement on credit as well.

If at all possible you should avoid buying on credit. You should certainly not buy from a store that refuses to disclose the full amount you’ll be paying if you sign up for their credit scheme. How can you trust them if they simply ignore the law?

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