Commission releases report on mobile trader industry

27 August 2015

Commission releases report on mobile trader industry

The Commerce Commission has today released a report detailing the findings of its year-long project looking at mobile traders, commonly known as truck shops.

The Commission’s project started last year with the aim of better understanding how the mobile trader industry operated, the business practices causing difficulty for consumers and the level of compliance with the laws the Commission enforces (Fair Trading Act (FTA) and Credit Contracts and Consumer Finance Act (CCCFA)).

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 the business practices of mobile traders and the extent to which they are complying with the law.”

As part of the project Commission staff identified and visited 32 different mobile traders operating around the country and spoke to mobile trader customers, community and non-government organisations. The project found mobile traders used similar sales methods, generally:

• Selling household goods from trucks or door-to-door using catalogues and brochures;

• 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; and

• Charging additional charges such as default fees for missed or cancelled payments, establishment fees and cancellation fees.

“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. 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,” said Ms Rawlings

The project found that mobile trader sales agreements or credit contracts were generally deficient. They often failed to outline basic details such as what the goods are, the exact payment terms, the total amount owed and the end date.

31 traders were found to not comply with all of their obligations under the FTA and CCCFA. 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, and a range of disclosure issues. Two of these traders are now under investigation by the Commission. The remaining 29 mobile traders have been advised of changes they must make to comply with the law.

“We will be revisiting the traders we have given compliance advice to in the coming months to check they have made changes and are now complying with the law. In the event they have not we will take further enforcement action, including criminal and civil proceedings where appropriate,” said Ms Rawlings.

Ongoing checks on mobile traders will take place as part of a second Commission mobile trader project over the next 12 months. “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. 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,” said Ms Rawlings.

The full report on mobile traders can be found on the Commission website.

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