Comment

Eight ways to stop exploitative shopping trucks

The Government has the power to put a stop to mobile shop trucks preying on the most economically-disadvantaged families in Aotearoa.

All it needs to do is take action.

The exploitative practices of the mobile trucks are well-known by now but, so far, neither central nor local government has demonstrated the will to act.

I did an investigation into mobile shop trucks for Consumer three years ago.

When I went out looking for trucks it took only five minutes for me to spot the first one, close to the town centre of a suburb in which families are typically on low incomes.

As is well-known, the trucks focus their efforts on such areas and are not seen in rich suburbs.

In Auckland, the trucks are most commonly found in West and South Auckland. They have also operated in Porirua for a long time.

However, by 2015, they were spreading to many other parts of New Zealand, including East Cape, Napier, Whangarei and Whakatane.

What most shocked me in 2015 was to discover that they had started selling food. As is the case with all goods, the prices were vastly inflated.

The core part of their appeal is that they offer credit. People do not need money, a credit card, a job, no convictions or a clean credit record to buy from the trucks.

Examples I came across included $20 for a can of corned beef; $66 for powdered milk; $35 for a packet of noodles; and $23.99 for a packet of biscuits.

For people on high incomes, it can be difficult to understand why families would use the trucks.

The core part of their appeal is that they offer credit. People do not need money, a credit card, a job, no convictions or a clean credit record to buy from the trucks.

By contrast, either cash (including through EFTPOS) or access to a credit card is required to buy food in a supermarket.

Another attraction is the trucks come to people’s doors. Many people on low incomes do not have cars or, if they do, the car is old and liable to break down, or they might not have money for petrol. Families might also not have money for bus fares.

I spoke to one young solo father. He was paying more than $200 a week on debts owed to mobile trucks and payday lenders. He owed money to numerous mobile trucks and did not know how much he owed in total.

The man said he bought “everything” from mobile trucks because he received his purchases instantly, but did not need cash or a credit card as he would in supermarkets or other shops.

He had paid $500 for a barbecue hamper; $40 for a set of tomato, soya and Worcestershire sauces; and $30 for cornflakes or rice bubbles.

The man bought a washing machine which broke down. When he tried to get recompense under the warranty, he was told the company had moved to Australia.

He signed up to buy a television and was told it would arrive before Christmas but it had not been delivered months later. The mobile truck operator told him he had not received it as he had missed some of the payments he was required to make before receiving the television.

Following a lengthy investigation, the Commerce Commission announced that 31 of the 32 companies it had examined were in breach of the law.

A woman I spoke to had bought a mobile phone from a truck for her youngest son. Both her sons had hereditary health conditions meaning they required dialysis for the rest of their lives. She wanted her son to have a phone in case of a health emergency.

When I spoke to the woman, she was paying $20 a week off the phone debt, but still had $600 to pay off. Each time she missed a payment, a $15 default fee was added.

Fees charged by mobile shop trucks include delivery fees, establishment fees, administration fees, dishonour fees, cancellation fees, account maintenance fees and field visit fees.

Some operators obtain multiple signed direct debit forms from consumers. If customers cancel one direct debit, the company will activate another one. Some buyers who have finished paying off debts find that unexpected debits have been taken from their bank accounts by mobile shop truck companies.

I had a long interview with the Commerce Commission when I did my 2015 investigation. The commission told me then that the trucks basically operated within the law.

However, following its own lengthy investigation, the Commission announced that 31 of the 32 companies it had examined were in breach of the law.

Since then, the Commission has started enforcement action against mobile shop trucks.

In March 2017, mobile trader Sales Concepts Ltd was fined $145,000 after pleading guilty to 10 charges under the Fair Trading Act.

The Government should immediately ban the sale of food by mobile shop trucks.

In the same month, the first-ever jail sentence following a Commerce Commission prosecution was handed down to Vikram Mehta, the owner of mobile trader Flexi Buy Ltd. He was convicted under the Crimes Act after taking money from customers without intending to supply the promised goods.

In August that year, Zee Shop was fined $108,000 for providing contracts with “incomprehensible” clauses.

So what can be done to end these exploitative practices?

Here are some suggestions:

1. The Government should immediately ban the sale of food by mobile shop trucks. The prices charged represent some of the worst exploitation in Aotearoa and are actually leaving families hungry because they pay so much for small amounts of food that they cannot afford to buy the quantities needed to feed themselves properly. A partnership should be piloted between the Government and supermarkets to enable people to buy basic food items. A delivery service could be incorporated.

2. A loan cap should be introduced. I and other advocates have for many years called for governments to legislate for an interest rate cap – an upper limit on the amount of interest that can be charged. No government has been willing to do this, despite the fact that there are interest rate caps in countries including Canada, Mexico, Japan, Singapore, and most European, South American and African nations. The lending of sums between US$100 and $4000 for short terms at high interest rates is regulated in 37 states in the United States. However, my view is that a loan cap is now required. This would place an upper limit not only on the amount of interest, but also the fees which can be charged.

3. The Government should investigate banning mobile shop trucks outright, or requiring them either to be licensed by the Government or by councils. Councils could pass bylaws providing that trucks can only operate in areas such as shopping centres, rather than going to people’s homes.

4. If mobile trucks are to continue operating, they should be required to provide consumers with items immediately, unless the transaction is a layby sale.

5. The Government should extend low interest loan schemes to offer affordable credit to many more people and keep them out of the clutches of loan sharks. Successive governments have started doing this in a small way in recent years and it was pleasing to see Minister for Social Development Carmel Sepuloni announce a widening of the Ministry’s Community Finance Initiative earlier this month. However, such loans need to be much more broadly available.

6. The review of credit laws announced by Minister of Commerce and Consumer Affairs Kris Faafoi in March needs to be robust. I have been commenting on and making submissions about consumer credit law reviews for 19 years. Invariably, they turn out to be weak affairs which utterly fail to stamp out abuses.

7. The Commerce Commission should be provided with additional funding so it can be pro-active in enforcement. Those exploited by mobile shop truck operators are some of the people least likely to be able to lodge complaints with the commission.

8. Exploitation by mobile shop trucks, like homelessness, is a problem of poverty. Workers need to be paid a Living Wage and benefits need to be raised to liveable levels to ensure families have enough money to pay for the basics – and a little more so they can participate fully in society.

There is no justification for this exploitation and it does not need to continue. The Government can put a stop to it.

*Catriona MacLennan was the Project Director for Ngā Tangata Microfinance Trust, a scheme set up to provide affordable loans to economically-disadvantaged people.

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