Council remains adamant on its report

20/06/2012 17:16

The Consumer Council wishes to clarify few points raised by Courts Fiji Limited in its response to the Council’s report on “Hire Purchase Industry in Fiji”

The Council undoubtedly agrees with Courts that hire purchase industry in Fiji plays an important role thereby enabling low income earners to improve their standard of living. However, the practices under such credit contracts are the Council’s major concern which it will certainly not condone.

The report highlighted issues such as the fine prints used on contracts making it almost impossible for consumers to read, resale of manufacturer’s warranty and calculation of credit charges.  Another major breach is the non-issuance of the pre-contractual disclosure.

The conditions in the contract are in fine print and dull lettering. The report shows that the font size used is 7 (possibly Arial 7), while the printing has produced an outcome which is equivalent to background watermark standard. Font size point 7 is not easily readable even if printed in normal black ink. These make it immensely difficult for average people to read the conditions that are applicable in the contract.

 

Confusions on warranties, extended warranties, and insurances also abound in the HP industry. This is the cause of a large share of total grievances which consumers have. From a business point of view, HP dealers also engage in reselling manufacturers’ warranties to consumers for all periods of warranties over 12 months. This generates an additional business of $1m annually.

Similarly, Payment Protection Plan is a concern because it only benefits the HP Company while the consumer pays for it. Why should the consumer pay for a particular insurance plan when he/she will not get the good replaced or repaired? It is seen as an additional business in which HP dealers engage.  Unfortunately the insurance industry regulator in Fiji has so far not examined the insurance business component of the HP industry and this is what the Council is pushing for.

Another breach is in the calculation of the credit charges. The law allows a credit charge to be levied, to no specific limit, on the actual outstanding credit, calculated on a daily basis. No HP

dealer abides by this; instead they levy a credit charge on the sum that is already repaid.

The Council agrees with Courts that the Ministry of Industry and Trade has provided schedules/documentations for HP Companies to follow. However, HP Companies are not following the law. For example. Under Section 157 of the Act, Hire Purchase Companies must provide a written summary of the hirer’s financial obligations based on Schedule 4. Quote

“the credit provider must provide the intending hirer with a written summary of the hirer’s financial obligations as set out in schedule 4”.

That is a written summary of one’s financial obligation must be given before the actual purchase is made. Courts, on the other hand admits that they are not following the law because they are referring to the verbal communication with the consumer which is not a pre-contractual disclosure as required under the Consumer Credit Act. How can one expect a consumer to remember all that information in order to make up his/her mind in the absence of “cooling period”? The Consumer Credit Act as amended in 2006 requires full disclosure of all costs of credit extended by HP companies in a written form. What consumers receive is a contract which is in fine prints to read and understand.

The Council stands by its report and the findings which states that repossession remains a market of its own generating about $7m annually. The issue here is the resale of repossessed goods. The Council strongly disagrees with Courts that both parties lose out in this. It is only the consumer who loses out by losing the good and also paying the difference if the good is sold at a lower price. The credit provider, on the other hand, recovers the cost of lost good from the resale and also makes a profit with the surplus if any.  We have seen repossessed goods sold on hire purchase again. Given that repossession is predominantly for reasons of financial hardship, the default and repossession market of over $7m per year hit the poorer workers/farmers the most.

The Council agrees with Courts that with a large customer base they must charge for recovery costs in terms of manning and collections costs. But if this recovery leads to profiteering then it is a concern.  For example charging $2 per phone call.  The non-interest charges such as documentation fees etc results in $25.5m annually.

The Council is baffled with the revelations made by the hire purchase companies after the release of the report. These HP companies failed to raise these points when they were given an opportunity through a close door consultation and submissions on the report.