Stores reject credit warning

Press, 24 December 1985, Page 5

Stores reject credit warning

A warning to Christmas shoppers from the Christchurch Community Law Centre that easy credit terms could lead to hidden costs and unexpected penalties, has been rejected by large retail stores. Mr Lester Wolfreys, the law centre’s co-ordinator, said on, Friday that shoppers were being encouraged to spend beyond their means by retailers offering interest-free terms and duty-free prices. He said interest-free terms were only interestfree if the goods were paid for within . the number of months stated. If they were not, the goods could often be repossessed or the purchaser required to pay interest of about 30 per cent from the first day of purchase. Duty-free prices en-

couraged people to think of the savings they were making, not the amount of money they Were actually paying, he said. Mr Wolfreys said he had had no complaints yet from Christmas shoppers, but he expected the effects of overspending would be felt next year. Mr Doug Paulson, manager of Smith and Brown’s Cashel Street store, said it would not be. in his company’s interest to allow customers to take on repayments they could not afford. Smith and Brown is offering customers the’ chahce to buy goods with a 10 per cent deposit and no interest or instalment until March, 1986. Mr Paulson said his company had a track record which was geared towards socio-economic groups who would not be able to afford

to buy goods without hirepurchase arrangements. Stringent credit checks were made on new customersand the terms of the contract were clearly spelt out, he said. ' f

“Until we have recovered the money from hire-pur-chase accounts we cannot make any money ourselves. We do not run’a business on a bad hire-purchase risk system,” he said. Mr Paulson said that in the event of a missed payment, a customer would still be charged the same rate of interest, but on the total amount still owed. Repossession Whs a last resort and could only occur after a customer had received nine letters advising him of-missed payments. The possibility of legal action or repossession was not raised until the fifth

letter, which was sent after three’repayments had been missed, he said. Mr; Phil Scott, South Island branch controller of the Farmers’ Trading Company, Ltd, said there were no hidden payments in his . company’s offer :: of six months free credit on a 12month account.

Customers were giyen a credit check for their 'own protection as well as the company’s, and the amount they would hhve to repay Was specified at the time of purchase, he said. . If a customer did have second thoughts about a. hire-purchase agreement, he could come back and cancel it, he said. : A customer who paid his account Within six months would pay no interest at all on his purchase. If a longer period were taken, interest would be paid but not on the original six-month interestfree period, he said. Mr Scott said that repossession Would occur only after a series of warnings and, if possible, a personal telephone call If non-pay T ‘ menthad been because of* an unforeseen financial rtis-; fortune, a new payment;: schedulecould often B# - negotiated. ' Mr Peter Crowhen, manager of Smith’s City Market Finance, Ltd, said it Was ridiculous to suggest that retailers should not be able ; to try to sell their products,

through interest-free offers. Smith’s City Market, Ltd, also haS a six-month in-terest-free offer to approved customers. Mr Crowhen said his coiripaiiy’s scheme was similar to the Farmers’ Trading Company offer and additional interest was not charged after the interestfree period. If the account was not paid within the interest-free period, interest payments were those agreed at the time of purchase, and there were no unexpected penalties, he said. - : Mr CroWhen said customers Were protected by the Credit Contract Act and were made aware of their repayment schedules at the time of purchase. He estimated that only about 50 repossessions would be made. each year out of a total of about 20,000 hirepurchase contracts.