Truck shops target poor with sharp prices, lower-quality goods, non-compliant contracts, regulator says
By Jonathan Underhill
Aug. 27 (BusinessDesk) - Mobile traders, or truck shops, target poorer communities, particularly in Auckland, with
non-compliant contracts, steep prices and often lower-quality goods than can be bought at ordinary shops, a Commerce
Commission investigation has found.
The regulator identified 32 truck shop operators for its Mobile Trader 2014/2015 Project with annual sales ranging from
about $150,000 to more than $7 million, including a group of three related companies with sales of almost $22 million. A
sample of 16 traders had combined annual sales of $40 million.
The commission began the investigation in response to a rise in complaints from consumers and community advocates, such
as budget advisers, about traders using sales techniques including door-to-door, telemarketing, websites, Facebook and
parking their trucks in prominent locations. Sales are almost exclusively on credit, layby or other deferred payment
It found that documents provided to customers "are often non-compliant" with the Fair Trading Act and the Credit
Contracts and Consumer Finance Act, prices charged are high and the goods often of lower quality than comparable items
in mainstream retail outlets, some traders were difficult to contact to cancel contracts or payments, and some continued
to direct debit customer accounts after the full price had been paid.
Advertising often doesn't detail the actual, total cost of items or provide specifications. Fees included establishment,
monthly administration, cancellation and default fees. Some traders made customers sign multiple direct debit slips,
allowing them to re-activate payments that had been ended.
"The customers are predominantly located in lower socio-economic areas, and may struggle to obtain credit or deferred
payment terms through mainstream channels," the report said. The clothing, bedding, electronic goods, toys, and
furniture were seen as desirable to lower income people who were unable to pay cash but felt able to make weekly or
fortnightly payments as low as $10 to $20. Typically no credit checks are done.
The commission did a price comparison exercise on some products on offer, based on truck shop catalogues. A Samsung
Galaxy S5 phone was on offer at $1,950 to $2,152.80, compared to prices of between $494 and $899 on the pricespy.co.nz
online price comparison website. A Playstation 3 was on offer for $1,550 compared to $390.99 to $529.99 on pricespy.
High prices and interest rates in themselves typically fall outside the scope of the laws unless deemed oppressive.
Among examples what the regulator called "obscure" terms in contracts was an opt-in option "to build an account credit"
after an item was paid in full. One contract had the clause: "Ongoing debiting: by ticking the box on the face page of
this agreement, the customer agrees to allow [the company] to continue to direct debit their bank account indefinitely."
The commission noted that the larger operators generally used more compliant documents than smaller traders. Some had
been operating more than 20 years, had more than 70 trucks and 35,000 active customers, and had a large amount of repeat
The commission is supplying compliance advice to 29 of the 32 traders and two others are being investigated for possible
law breaches. It plans to follow up in the next 12 months, at which stage it will "take further appropriate enforcement
action including criminal and/or civil proceedings in suitable cases" if it finds non-compliance. Sixteen traders aren't
on the Financial Services Provider Register or members of a dispute resolution scheme and have been advised of their
responsibilities under the FSPR. Their details have been referred to the Financial Markets Authority, the commission