Two years’ jail time has been handed down to Vikram Mehta, the owner of mobile trader or “truck shop” Flexi Buy. He was sentenced in a prosecution initiated by the Commerce Commission – the first of its kind to result in a jail sentence.
Mehta was convicted today under the Crimes Act 1961 as a party to Flexi Buy’s conduct for obtaining money from customers by deception and accepting payment from customers without intending to supply the goods they contracted to purchase. He has indicated he intends to appeal.
Flexi Buy sold household and electronic goods around the North Island between late 2012 and early 2014. Only nine of Flexi Buy’s customers ever received their goods, while Flexi Buy entered into over 300 consumer credit contracts during its period of operation. It ceased to trade after the Commerce Commission announced its investigation.
In sentencing Mehta today, Judge Cunningham said “because of the seriousness of what occurred here, I am not minded to impose home detention. In my view it needs to be a sentence at the top of the hierarchy of sentences to send a message to Mr Mehta and any other persons who seek to, in my words, rip off vulnerable people, that such behaviour that breaches the criminal law will be met with the full force of the criminal law.”
In February 2016, Flexi Buy was also fined $50,000 in the Auckland District Court for breaching the Credit Contracts and Consumer Finance Act 2003 by failing to provide its customers with adequate disclosure of key information about their credit contracts. A further $3,408 was awarded in damages to affected customers.
The Commerce Commission cracked down hard on mobile traders in an investigation spanning 2014 and 2015. Mobile traders or truck shops usually sell household goods from trucks or via door-to-door operations, targeting people living in low socio-economic areas, charging much higher prices than mainstream retailers and using credit or layby as a key feature of their operation.
In its investigation, Commission identified and investigated 32 different mobile traders around the country to get a better understanding of how the industry works, what business practices were causing difficulty for consumers, and the level of compliance with the law.
Of these vendors, all but one – Home Direct – were found to be noncompliant with trade law.
Mobile trader Bestdeals 4 You Limited was fined $47,250 on February 22 for failing to disclose key consumer information about its credit contracts and layby sales agreements. In a statement connected with this court case, commissioner Anna Rawlins warned that businesses choosing to operate in the consumer credit market had to be familiar with, and follow, consumer credit laws.
“In the Bestdeals case over 1,000 debtors were affected by the CCCFA offending. Some of the Bestdeals credit contracts failed to include basic information such as the total number of payments required and the amount of those payments,” she said.
“Businesses should also make sure that they are complying with the FTA including laws applying to particular sales methods that they choose to use, such as layby sales.”
When the crackdown was first launched, commissioner Anna Rawlings said complaints about the business practices of mobile traders had 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 concerns identified during the Commerce Commission’s mobile trader project included:
- 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