‘Read fine print' warning on hire-purchases

Press, 16 February 1980, Page 6

‘Read fine print' warning on hire-purchases

People buying goods on hire-purchase have been warned to pay greater attention to the “fine print.”

The Consumers Institute has received increasing numbers of complaints about hire-purchase transactions, particularly documentation charges and rebates.

The institute’s Christchurch office has dealt with about 60 such complaints in the last six months, according to the complaints advisory officer, Mr S. W. Mangos. People were generally ignorant of the Hire Purchase Act and their entitlements under agreements they signed. “We always tell people their signature is the most important thing they have in business,” he said. Booking fees have been the subject of many complaints and inquiries. Although not clearly defined under the 1971 hire-purchase legislation, they - are intended to cover the cost of paper work and legal expenses entailed in agreements. The fee can vary greatly from seller to seller, and

some even prefer to incorporate that portion of their costs into the hire-pur-chase interest charge. Mr Mangos said the average booking fee on retail items was about $lO, and that for agreements on car sales, between $25 and $4O. The fee had to be refunded, along with interest charges, when the purchaser repaid his credit within the “no terms” period specified by the hire-purchase agreement, he said. The booking fee portion of the rebate was sometimes overlooked either deliberately or by mistake, he said. Mr Mangos had not found much trouble with the “more reputable finance houses,” and the main source of inquiries was with smaller finance companies. . The institute had acted to help purchasers who had agreed to what it considered “unreasonably high” booking fees. In one instance, an agreement to borrow $2OO in a

used-car deal included a fee of $35. Although interest charged on the loan was only 9 per cent, the size of the booking fee effectively put this up to 25 per cent, he said. Mr Mangos outlined another car purchase in which a 140 fee put the total charge on a $550 loan over 18 months up to $269. The institute had helped the purchaser refinance and benefit from a rebate under the original agreement. A complaint over the size of a booking fee could be investigated under the profiteering provisions of the Commerce Act, said Miss C. E. Tucker, the Trade and Industry Department’s assistant district officer for commerce. This would involve the department in comparing the fee in question, with those generally charged, she said. The act stated that any business could be profiteering if it charged 20 per cent or higher than the “ruling average price.”

b Miss Tucker said a purt chaser made aware of the s booking fee before signing a fh i r e-purchase agreement j would be legally bound to pay it. She therefore warned ’ purchasers to be fully aware . of all provisions of agreei ments before committing 1 themselves. r The New Zealand Farmers Co-operative Association, I Ltd, the South Island’s largj est retail chain, charged a r flat $5 booking fee on all its hire-purchase transactions, > said the company’s credit > manager in Christchurch, Mr M. G. Smith. . The fee was on top of a \ 12 per cent interest rate and both would be removed if . the debt was cleared within . the “no terms” period, usually five months, he said. He described it as a > “token payment to cover the > cost of preparing the documents” and said the com- ' pany had introduced it last ’ year when it found such a , fee was standard practice in hire-purchase agreements.