Commissioner Anna Rawlings said complaints about the business practices of mobile traders has increased markedly in recent years.
“We had anecdotal evidence that some of the most vulnerable members of our community were being given confusing or deceptive information by mobile traders, particularly over the total price of their purchases,” Rawlings says. “We have taken action over mobile trader complaints before, but this project was a chance to delve deeper into the business practices of mobile traders and the extent to which they are complying with the law.”
The Commerce Commission identified and visited 32 different vendors operating as truck shops around the country. They spoke to customers, communities and NGOs involved. The commission found the traders tended to use similar sales methods which included the sale of household goods from trucks or door-to-door operations, targeting those in lower socio-economic areas, charging significantly higher prices than mainstream retailers and selling on credit or layby. Additional charges invoked past the point of sale were also a feature.
“Customers were found to be attracted by the convenience of mobile traders, the low weekly or fortnightly payments and the ‘easy’ credit as many traders do not complete credit checks,” Rawlings says. “While the total price of an item may be significantly higher than in other stores, sometimes more than double, the relatively low repayments, often as little as $10 per week, were attractive.”
Thirty one of the 32 traders investigated were found to have fallen short of their obligations under the Fair Trading Act and the Credit Contracts and Consumer Finance Act, and two are now under investigation by the Commerce Commission. The remaining 29 have been told they must make changes to comply with the law.
Issues identified include:
- Making it difficult for customers to cancel agreements
- Obtaining multiple signed direct debit forms
- Continuing to take payments after an item is paid for
- Misleading and confusing representations
- Disclosure issues
Rawlings says the Commerce Commission will be revisiting the truck shops which had been warned over the next few months to check they are following through with the required changes. The commission will be carrying out a second mobile trader project over the next year, and ongoing checks will be part of this.
“We are committed to increasing the levels of compliance and addressing non-compliance within the industry. While the Commission can, and will, take action on a number of business practices causing difficulties for consumers, others such as high prices and interest rates fall outside of the laws that we enforce,” Rawlings says. “Currently there is no law in New Zealand that restricts the prices or interest rates traders can charge, other than the CCCFA requiring that interest charges are not oppressive.”
Consumer magazine conducted research into truck shops earlier this year. It says Home Direct is the most established of these companies, operating since 1973. The company has more than 250 staff who sell online, over the phone and from trucks.
The Register contacted Home Direct for comment on the report. Its chief executive Michael Wright says the company was the only mobile trader of the 32 investigated which didn’t receive any compliance notices from the Commerce Commission. He said the company had worked closely with the Commission over the last few years to make sure it complied.
“It is of concern that cowboys exist in this industry and that their tactics sometimes give the industry a bad name,” Wright says. “As the largest player, with over 70 mobile shops and coverage across NZ, Home Direct is acutely aware of the need to abide by the law.”
Home Direct found the Commission’s report generally fair, balanced and accurate, Wright says, although he did criticise its work on price comparisons. He said the Commission had failed to consider the diminished purchasing power of Home Direct as a medium-sized retailer up against mainstream whiteware and electronics retailers.
Currently, Home Direct’s online store lists a Haier 6kg manual dryer for sale at $899. Farmers offers the same model for $409 on special, and $549 at non-discount price. Harvey Norman also has a special on for the Haier 6kg dryer, offering it at $415.
“Home Direct applauds the ongoing compliance activity the Commerce Commission has promised and encourages them to take all possible legal steps to clean up this industry and give more assurance to the customers who enjoy this form of shopping,” Wright says.