Strengthened Credit Contracts and Consumer Finance Act 2003 (CCCFA) laws have been enforced on a number of mobile traders for the first time since they were passed in June 2015. Goodring Company Limited and Betterlife Corporation Limited have been fined $98,000 and $73,500 respectively.
The strengthened Credit Contracts and Consumer Finance Act 2003 laws affectred traders who were part of a year-long project undertaken by the Commerce Commission with the aim to better understand how the mobile trader industry operated.
Commissioner Anna Rawlings said, “The number of complaints we receive about the business practice 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. We have taken action over mobile trader complaints before, but this project was a chance to delve deeper into their business practices and the extent to which they are complying with the law.”
Goodring Company Limited and Betterlife Corporation Limited had earlier pleaded guilty to 28 charges and 6 charges under the CCCFA, all relating to their lending practices.
Both companies failed to provide borrowers with the legally required information while not providing information in a clear and concise way, as required by the act. Under the act, lenders must also be registered on the Financial Service Providers register. Despite being aware of this, Goodring was not registered.
Both companies are based in Auckland and operate either from a truck or by using door-to-door sales staff. The project found mobile traders all used similar questionable sales methods:
- Selling predominantly in lower socio-economic areas and to those who may struggle to obtain credit through mainstream channels.
- Offering goods perceived as desirable by the target market and often at lower quality than comparable goods in mainstream retail outlets.
- Charging significantly higher prices than for comparable goods in mainstream retail outlets.
- Selling goods on credit or layby.
- Charging additional charges such as default fees for missed or cancelled payments, establishment fees and cancellation fees.
Goodring has been selling branded hoodies to customers for $159, well in excess of in-store prices, while one Betterlife customer purchased an iPhone 5C for $2,401 to pay off in instalments – the same phone retails for around $600.
“Customers were found to be attracted by the convenience of mobile trades, the low weekly or fortnightly payments, and the ‘easy’ credit as many traders do not complete credit checks,” said Rawlings.
Of the 32 mobile traders investigated, 31 were found non-compliant with their obligations under the Fair Trading Act and the CCCFA. This year alone, the commission has prosecuted six mobile traders. In February Flexi Buy Limited was fined $50,000 and $3,480 was awarded in damages to affected customers.
A fourth trader, Ace Marketing Limited has pleaded guilty to the Commission’s charges and is expected to be sentenced in July.
The Commission has a further 14 ongoing investigations into the conduct of mobile traders.