The truck stops hereby Aimie Cronin
Large debts are being racked up by some of the country’s most vulnerable people as a result of unsavoury selling practices. Consumer groups say only law changes will stop the abuse.
The truck shop smells of a smoker’s breath. John Bishop, 56, jiggles his hands in his pockets. For a moment, he looks around. Jandals, $12, hang from the roof, and there are shelves full of Etnies shoes, $169, Metal Mulisha caps, $59, and toys, toiletries, bedding, clothing and electronics.
Bishop is inside what looks like a messy wardrobe, having just wandered down his driveway in socks and sandals and climbed into the red truck with the logo “shopping made simple”. He’s after only one thing, a laptop for his daughter, so she can use it for school.
“She’s going to college. I thought I might pay it bit by bit.”
Bishop, who lives in South Auckland, has bought from Home Direct “heaps of times”, but he is a new customer to Arena Alipia-Walker, who has been selling on the trucks for six months. Alipia-Walker drags a Lenovo laptop, $749, out from the bottom shelf and asks, “Would you like to see it first?” Bishop nods.
Out it comes. The very act of opening it has Bishop aahhing in wonder. “I’ll take it,” he says.
He knows he could find the same laptop cheaper up the road in Manukau. He doesn’t care.
“I like it here, because I can pay $30 a week,” he says.
Bishop takes his laptop and the $49 pack of Playboy cologne he’s added at the last minute, and he heads back inside to sleep before going to his night-shift job as a security guard in Otahuhu.
The Home Direct truck weaves its way through Mangere’s streets. It stops outside the house of a Pasifika man who works part-time as a machine operator and is about $200 in credit. He files through the rack of clothes, bored, and musters up interest in a 3XL basketball singlet. He leaves with an armload of speakers, toiletries and a phone upgrade totalling $645.
“It’s good for me,” he says, “because I don’t have much cash to buy from the shops.”
It’s the middle of the day in South Auckland, and for Alipia-Walker, an ex-Work and Income case worker, this is the gig. He expects January to be quiet after the Christmas rush, when “you’re literally going from house to house”.
Back at the Home Direct warehouse, chief executive Michael Wright, a tall man with styled grey hair and a Herne Bay look, points to every conceivable item he can and emphasises its quality and reasonable pricing. “We are so sensitive about what is going on in this space that we are desperately trying to prove to people we provide a good service.”
It’s to the John Bishops of the world that Wright believes he is providing that service: working-class folk who like the convenience of home shopping, not necessarily people who can afford to pay up front, but with the means to pay what they commit to paying. There’s no point selling goods to people who can’t pay for them, he says.
Home Direct is the largest mobile trading business in the country. It has 71 red trucks on the road, 25 in Auckland. It offers customers a layby service, and a finance option at 19.5%. There are tens of thousands of people paying Home Direct an average of $20-25 a week and there are tens of thousands more on the database who interact with the company on a casual basis. The company’s call centre, based largely in Fiji, has a staff of 75 and receives about 2600 calls a day. All up, Home Direct employs more than 200 staff and pays the truck-shop operators a base salary of $50,000 (to deter them, he says, from doing the hard sell). Wright won’t say how much money he or his company is making, but figures from a Commerce Commission report released last August say one unidentified mobile-trading company with more than 35,000 customers has revenue of more than $7 million a year, and another group of three associated companies reported an annual revenue of nearly $22 million in the 2013-14 financial year.
That same report identified 32 mobile-trading companies, largely based in Auckland. Only one, Home Direct, has not been issued with compliance advice as a result of the commission’s findings.
In a long list of bad business practices, the report confirmed what community workers have been saying for years: to varying degrees, some of those 31 businesses target poor neighbourhoods, sell inferior-quality goods at inflated prices, charge hefty fees and confuse customers with wordy and unclear contracts. Some fail to deliver goods when they say they’re going to or, in some cases, at all. Some continue taking money from customers despite having been paid the full amount owing under the contract.
You’d be hard-pressed to find a budgeting service that hasn’t encountered the truck shops. New Zealand Federation of Family Budgeting Services chief executive Raewyn Fox says the biggest issue her team has is that “they don’t answer their phone calls, so you can’t sort things out”.
Home Direct, she says, is the one mobile trading company that shows it is possible to “do it well” because it has “good standards and user-friendly processes”. Other community workers say their clientele often refer to the red Home Direct trucks when they talk about being swallowed up in debt.
“They should ring us straight away,” responds Wright. “We will put a person on that account and do what we can, be it writing off the debt – and we write off a lot on hardship – through to putting a plan in place, [going] interest-free, there are all sorts of things we can do to help them.”
The Fair Trading Act and the Credit Contracts and Consumer Finance Act do not prohibit the sale of goods to vulnerable consumers, but in the past 18 months, the FTA has had changes relating to uninvited direct sales and unfair contract terms, and the CCCFA has added new requirements around responsible lending.
Businesses now must make “reasonable enquiries” to ensure borrowers “can make repayments without suffering substantial hardship”. The tightening-up of the CCCFA requires that all advertising be expressed clearly and in plain language and that borrowers be treated in an “ethical manner”. To what degree these new principles will be enforced at street level is yet to be tested. “We don’t know how many teeth the responsible-lending principles are going to have,” says Fox, “until someone takes a case against them and we can see where the level of tolerance lies. It’s a wee bit of a wait and see.”
‘I HATE THE TRUCKS’
Gemma Pitman was 16 when she first went into debt with a Lync Co truck. It parked outside the Hamilton house where she lived with her mum, siblings and the daughter she had given birth to the previous year. She was honest with the salesman about her age and situation and he told her it was fine, she could still sign up. She gave him her community services card as ID and she asked a man she didn’t know from across the road to sign a form as her guarantor.
“I thought, ‘Oh yeah, I can pay this off.’ I thought it was cool as. Then it just got dearer and dearer, they were coming around every three weeks and selling me stuff. When I turned 18, I realised they were chewing up all my money.”
She’s now 21 and she is still paying back the debt. She looks young. She swings her ponytail like a child and has freckles on her nose. “I hate the trucks,” she says, “I hate them coming over. Every time they come knock on the door, I just start swearing, because why do they keep coming back here? Why don’t they go to some other area?”
Her daughter, Jaedha, now five, stands on a chair in the yard and picks loquats from the neighbour’s tree. Her cousin Nikita, 22, wears pyjamas in the middle of the day and she’s paying back debts to the trucks that total tens of thousands. They lean on the fence and look down the street and say the best way to describe this area is to call it “the hood”. They know why the trucks keep coming back. No one has much cash round here. They estimate about six different mobile-trading companies come past their house four times a week. The trucks are a way of life.
None of the mobile-trading companies spoken to by the Listener would accept that targeting poor neighbourhoods is core business, but many spoke about having poor customers. “Just because someone is on a low income,” says Wright, “they shouldn’t be deprived of access to good-quality product.”
“They have the same aspirations as the rest of us,” says Home Direct’s general retail manager, Janelle Calder.
“There’s nothing stopping them saying no to us,” says Wright. “It’s not about the hard sell or finding people who are vulnerable that we can exploit, it’s about working with these families to help provide for them and their children,” says Calder.
Shoppers Stop director Jackson Pinto says in the past, he would tell his drivers to do a lot of doorknocking to gain sales, “but we stopped that ages ago. There were too many truck [operators] knocking on the doors in the poor areas. Now they have had enough and they don’t want the doorknocking.”
He says most of his sales are by appointment and referrals and he and his team try to avoid selling to customers on a benefit, “because the bad debts are increasing”. He says half his customers do not pay for the goods they receive and he ends up wiping their accounts and banning them from any future shopping. “The [public] think we are ripping these people off,” he says, “but we are not. They are ripping us off.”
The Commerce Commission report found that “almost all” the product in the truck shops “tends to be sold at prices which are significantly higher than the cash prices for a comparable product purchased from a mainstream retailer”. It is possible for mobile traders to charge no interest or added fees on products to avoid responsible-lending obligations under the CCCFA, and then make up what they’ve lost by increasing the cost of goods.
A contract from Lyne Co (the mobile trader Gemma Pitman owes money to) obtained by Consumer NZ in 2014 showed the company charged $23.99 for one pack of biscuits, $39.95 for a box of cereal, and $49.99 for a pack of rubbish bags. Company director Judson Li would not agree to an interview with the Listener, and when asked about the price of food items on his trucks, he hung up the phone.
Hera Keepa perks up when she hears there’s a truck shop selling food in Hamilton. That would really help her out, she says, on days when she’s got no cash. She asks if this truck sells cigarettes. She registers the inflated prices of the items and doesn’t appear to be shocked. In the past she has paid too much for things. “I’ll be honest,” she says, “I think I just didn’t care because I could get the stuff there and then.”
Keepa, 30, used to sit in front of the pokies all day, and when she kicked that habit, she sat at home and watched the trucks pull up and couldn’t help herself. “It’s worse than gambling, because you feel like you’re spending money on nothing, but at the time it’s like, ‘Yay, we’ve got brand new things.’”
She says the money she spends on her debt with the trucks could be used to take her three kids on an outing for the day, but at the moment she can’t afford to do that. “I know it puts me in hardship, but it’s the temptation that gets me.” She is paying off debt with five different trucks. The first thing she bought from one was a case of unbranded makeup, “$2 shop stuff”, for over $100. Then an expensive jacket for her ex-partner, clothes for her children and for herself, an unbranded tablet and cellphone, toiletries, speakers. “I live in poverty,” she says. “I put my kids in financial hardship sometimes. I can’t feed them, because of all these things I do.”
MAKING ENDS MEET
Retirement commissioner Diane Maxwell says that for many truck-shop users, debt is the difference between making ends meet and not. “We go through people’s finances with them day to day, and if you took away the debt, they would be okay, they would be able to pay for everything. You put the debt in the equation and it’s not enough to go around.”
She doesn’t mind voicing her contempt for the mobile-trading companies she comes across: “I am quite tempted to go and let their tyres down, frankly.” She talks about the vulnerable people who use the trucks, who don’t have the confidence to buy at mainstream stores, who don’t have the cash, sickness beneficiaries, people who are lonely, people who respond to friendly doorknockers because no one has been nice to them all week.
In her opinion, the mobile-trading companies are “predatory operators and they play on the fact that you need a boost and you can have it right now and it feels okay. There’s a whole relationship built in there that is part of the deal.”
Linda Aitchison, 64, stands on the street in Frankton, Hamilton, and shows off the trackpants and jacket, $119, she bought recently from a truck shop, “from a lovely lady called Jenny”. She wears them every day. She pays $10 out of her sickness benefit every Monday night, and hopes she won’t have reason to use the trucks again once the clothes are paid off. She approached one because she saw it parked on the road and she needed clothes and she had no cash. “I’m not really keen on them,” she says. “Some of them are rip-offs and I’m short on money. My cat and I are starving. I’m walking the streets picking out food from the rubbish cans.”
A lot of the time, mobile-truck customers are borrowing small amounts and can drip-feed repayments. “But it adds up,” says Maxwell. She and her team do a lot of work with borrowers around the concept of today versus tomorrow. “Today, the problem is everything, but tomorrow the debt is still there and the problem is bigger.” She has seen “the penny drop” when people better understand the effects of debt and its implications on the future.
Education could be the most effective tool in combating the problematic effects for some truck-shop customers. Lending is a difficult area to legislate and methods such as adding interest-rate caps could mean business owners will recoup the money elsewhere with extra fees, or by charging more for each item. Another concern is that although community workers may be aware of updates to the CCCFA and the FTA, “a lot of people don’t know they have rights and so they don’t know they can say this isn’t right”, says Maxwell.
Community workers agree that arming borrowers with financial literacy is a must, but one based in Mangere, Justin Latif, says “there are really not enough budgeters in this community to handle all the budgeting problems”. The Federation of Family Budgeting Services works with 45,000 client families each year.
The Do Not Knock initiative, run by Consumer NZ, is lobbying for changes to the Fair Trading Act, on the heels of Australia strengthening its laws, to make it an offence for sellers to ignore a Do Not Knock sign. Latif has noticed Do Not Knock stickers on a number of doors in the Mangere community, and although it does not address the issue of truck shops parking in poor neighbourhoods, or those being called to people’s houses, it does give power to people who are trying to stop using them. “There has been a shift in thinking,” he says, “and as that grows, as communities get stronger, you will see these guys being pushed out.”
STICKERS ON HER DOOR
Gemma Pitman has two Do Not Knock stickers on her door and has given them to neighbours and friends. If the stickers don’t work, she plans to yell the mobile traders out of town. “I’ll just tell them to go get …,” she says.
Hera Keepa also has a sticker on the sliding door at her flat. She recently sought help from a community budgeting service. “I am hoping to get myself out of this debt,” she says. “I’m gonna be strong enough to stop them this time around. Now that I have my budget adviser and the sticker, I’ve turned away so many people, and I’m pretty proud of myself for doing that.”
The mobile traders still knock, she says, despite the sticker. “I tell them, ‘I’m sorry, I can’t afford it’, and they say, ‘Well, you can pay the minimum $10 a week, $10 is fine.’ They are not worried about how broke we are, they are worried about getting a sale. I wish they would stop altogether, but I don’t think that’s ever going to happen.”
Peter Humphreys is the manager of the men’s night shelter in Hamilton central. He has seen the truck shops parked up across the road. The last time was about four months ago. “I went out and said, ‘Do not come here. Many of these guys are here because of debt, so for the [truck shops] to come to the shelter, I find it just unbelievable.”
George Mohi, 44, a Hamilton streetie and occasional resident at the night shelter, owes about $2500 to several truck shops. He pays one of them $23 a week for a faux leather jacket that cost $400, that he feels no pride or joy in owning, he just needed something warm.
“You don’t have cash, so you’re thinking about the now, you know what I mean? They don’t give a shit if I can pay it back.” He shuffles down the street talking to himself in a low murmur. It’s probably too hot for the jacket, but he wears it anyway because he has nowhere to put it down, and because he can’t risk losing the most expensive thing he owns.
A high price to pay
Our laws do not prohibit sales to vulnerable customers, according to a Commerce Commission report.
From the Mobile Trader report, released by the Commerce Commission in August:
• Mobile traders are businesses that do not have fixed retail premises in the traditional sense.
• Mobile traders use a variety of sales techniques, including uninvited direct sales (through door-to-door or telemarketing sales), parking mobile truck shops in prominent locations and using websites and Facebook. They sell predominantly or exclusively on credit, layby or other deferred-payment terms.
• There is no law that restricts the price that traders can charge for their goods.
• [The report] considered that 31 of the 32 mobile traders did not, to varying extents, comply with all of their obligations under the Fair Trading Act and the Credit Contracts and Consumer Finance Act. It also found that many mobile traders did not appear to be sufficiently prepared for recent and upcoming changes to those Acts.
• The report identified 32 mobile traders, of which 30 have head offices in Auckland. The others are based in Tauranga and Hamilton.
• The total revenue from a sample of 16 mobile traders for the financial year ending March 31, 2014, exceeds $40 million.
• Almost all products tend to be sold at prices that are significantly higher than the cash prices for a comparable product bought from a mainstream retailer.
• The mobile traders’ customers are predominantly located in lower socio-economic communities. Many of the customers have limited financial literacy and are unable to get credit elsewhere.
• Prices and interest rates charged are high when compared with mainstream retail outlets. The FTA and CCCFA do not regulate prices or interest rates, except to the extent that the CCCFA requires that interest charges cannot be oppressive. Generally, the high prices and interest charges fall outside the scope of those Acts.
• The sale of food by mobile traders is not regulated by the FTA or the CCCFA.
• The Acts do not prohibit the sale of goods to vulnerable consumers.
In the next 12 months, the Commerce Commission plans to revisit the mobile traders who received compliance advice and review contracts, websites and catalogues. According to the report, about 20% of the mobile traders have been reluctant to assist with enquiries and less receptive to the commission’s approach. It says these traders will be a particular focus of its ongoing work. Former Flexi Buy director Vikram Mehta has been charged with obtaining money from customers by deception and accepting payment from customers without intending to supply the goods they contracted to buy.
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