TIME-PAYMENT SYSTEM

Taranaki Daily News, 22 August 1930, Page 7

TIME-PAYMENT SYSTEM

CRITICISM AND DEFENCE. CONFLICT OF OPINIONS. “That the time payment system io one of the curses of trading in New Zealand” was the .subject of a debate at a luncheon meeting of the Auckland Advertising Club on Tuesday. The consensus of the opinions advanced was that the advantages of hire purchase outweighed the disadvantages. Mr. W. H. V. Taine, president, of the club, opened the discussion with a 'condemnation of the time payment system. He said that many business men besides himself were anxious and disturbed because of the flooding of the commercial world with the deplorable doings of “this overgrown American baby.” ■ ;

“The time payment traders regard as their particular and more of less lawful prey those among us who might in more honest days have been called .our weaker brethren,”, said Mr. Taine. “By trading on the covetousness, extravagance and other, follies and weaknesses of a section of the people light in the pocket and light in the head, the time payment system has fully earned the verdict that it is a curse to the community.” Mr. Robert Laidlaw, defending, the system, said that much misunderstanding of it appeared to exist. He denied that it was unable to render satisfactory service to the community because of heavy costs. The business with which, he was connected did a considerable amount of time payment trading and its working expenses, 20.7 per cent, of turnover, were lower than those of a large Australian “cash and carry” department store, which were shown in the latest balance-sheet as 21 per cent. This proved that extended credit and -service could be given without extra charge. .

Time payment business had made possible lower ultimate charges. It enabled cash buyers to be supplied cheaper, because the great stimulation of demand led to economical mass production, and. even with the addition of interest chargee the purchaser on time payment did not have to pay more than the cash price when production was not so great. Time payment completed the chain of credit by extending it to the. consumer. That it was an advantage to all concerned no one in the business and understanding it could doubt. Extravagance was not a result of the system. On the contrary, it led to systematic saving. The habit of thrift was cultivated and the effect was seen in better furnished and more comfortable homes. It would be a benefit to the community, said Mr. Laidlaw, if everyone would adopt the policy of extending the consumer credit in times of depression and striving to do the utmost cash business when boom conditions existed. Dr. E. P. Neale said that the time payment system had made it possible for many people to acquire things which otherwise would have been out of their reach. It enabled people to obtain goods which were both desirable and endurable, and the re-orientation of expenditure thus brought about was of social advantage. The system was still in its infancy. Difficulties which were being experienced would disappear as buyers and sellers accumulated experience. It was necessary to exact a sufficent down payment, and the instalments should not be spread over so long a period that the decreasing value of. the goods would be an encouragement to the buyer to default.

The seller sometimes did not deal quite fairly with the buyer, failing to make it clear that interest at 8 per cent, would be charged not bn the reducing amount but on the total, thus beina°equivalent to about 16 per cent. It would be fairer to explain that 6 per cent, interest was being charged, and an additional amount to cover the extra expenses incurred under that form of transaction. On the • whole the hire purchase system had very much more to commend it than could be said against it. “Times change and we must change with them,” said Mr. P. Free. To be economically sound, the deposit paid under a time payment agreement must be sufficient to cover the first depreciation. Unless properly administered the system had a tendency to lead to undesirable forms of trading. Mr. Grey Campbell, denying that the time payment system was responsible for economic troubles, said that the records showed that mortgages and. open credit had been responsible for more bankruptcies than hire purchase dealings. A danger that traders should guard against was extension of their operations beyond the limitations of their capital, causing difficulty in renewing stocks. At the close the president said he still believed in discount for cash.