Friday, 26 April 2013

Store credit abuse

Consumers have a right to judge the people who sell us things only by their actions. We shouldn’t judge them by their skin colour, their nationality, gender, age or sexual orientation, just by the way they behave. The good news is that people spread the word about companies that misbehave remarkably well. These days with tools like Facebook the abusive actions of a store in Gaborone can be known throughout the city, the nation and the world within moments.

Just in the last couple of weeks I’ve seen posts on Facebook reporting problems with banks, restaurants, insurance companies, cellphone network operators, a wide range of companies. But not one about furniture stores and that confuses me when perhaps the commonest problem reported to us is store credit abuse.

Do I really mean abuse? Is it that bad? Is there any evidence to suggest that furniture stores are abusing us?

If only we had evidence of how store sell us thing on credit.

We do now.

In the last couple of weeks some of our undercover mystery shoppers visited a variety of furniture stores in Gabs. Our team is a mixture of people, some young, some older, some men, others women, fairly typical of the sort of people who buy furniture and kitchen equipment on credit. Their task was to visit stores, pick an item or two and ask about buying them on credit. Their assignment was to test how much information they were given by the store. Did the store staff mention the total amount they’d pay? Did they suggest buying for cash instead? Did they mention and explain the insurance cover the store might offer them? Did they explain the risks of buying on credit? Did they explain the contract they would be asked to sign? Most importantly, were they given a copy of the contract to read before signing it?

The results were mixed.

To begin with all the stores explained the payments we’d have to make. They described the deposit, the amount of each instalment and the number of instalments needed. But not all of them then told the customer how much this would come to. That’s probably because they didn’t want to make it clear to the potential customer that the total credit price is sometimes double the cash price.

Obviously none of the store staff told our team to think again about buying on credit and saving up instead. But you wouldn’t expect them to, would you?

Unfortunately very little information was given to our mystery shoppers about the risks of buying on credit. Nobody tried to address the biggest single misunderstanding that consumer have about buying on credit. What happens if you fail to make payments and the goods are repossessed? Most consumers think that if this happens the entire deal is over and that they can walk away from the deal. This simply isn’t true. Even though you don’t have the goods any longer, you still owe the store lots of money. The fridge or sofa you bought on credit, at perhaps twice the cash price is now worth just a fraction of the cash price, leaving perhaps a massive outstanding balance still to pay. You can easily still owe most of the total credit price and then penalties and legal fees on top.

None of the stores explained this, not one of them even mentioned the issue. It’s obvious why.

Many store credit schemes come with insurance policies and this was something else we wanted to know about. Curiously only a couple of the stores mentioned their insurance policies, which seems strange if they are of such benefit to consumers? The reason they didn’t explain them is obvious. These insurance policies aren’t for your benefit at all. They exist to protect the store, not you. They insure your debt, not your possessions. Not one of the stores explained what the policy actually covered.

However the big problem was the contract the store wants you to sign. This is where things switch from being sharp business practice to being abuse.

Each of our mystery shoppers asked very politely to see a copy of the store credit agreement they would be asked to sign. On every occasion, in every store, without exception they were told “No”. They were told that they would only be able to SEE the agreement when they were given it to sign.

This graph is knowingly polemical and does not represent
any facts, results or opinions expressed or implied.
But store credit is despicable, trust me.

Why? Why are the stores so scared of showing their potential customers the contract they want them to sign? What are they trying to hide?

Despite what some might think, I can’t read people minds. I don’t know for sure why you and I aren’t allowed to even read the contract before they ask us to sign it but I can guess. I suspect it’s because they don’t WANT us to read the contract. They don’t want us to know what it says. They want us to be ignorant and easier to abuse. They are also don’t want us to see some of the clauses in the contract, like the ones that say that I agree that the goods were in perfect condition when they arrived, before I’ve even left the store, days before the good are actually delivered.

That’s why you’re not allowed to take a copy of the contract away with you, to keep it overnight, to show it to your partner or parents. They’re absolutely terrified that you’ll read it.

The lesson is simple. Furniture stores are not really furniture stores. They’re moneylenders. Their only interest s to lend you money at exorbitant rates and then screw you for every thebe when things go wrong.

Do not buy things on store credit unless you want to be a victim of abuse.

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