Mobile truck shops taking low-income families for a ride

Mobile truck shops are facing scrutiny again for questionable business practices. Photo/Hamilton News.

An investigative report published today reveals mobile shopping trucks continue to prey on low-income families in Wellington and Auckland.

The report, published on the Newsroom site, found that the shopping trucks move through neighbourhoods, selling household products at highly inflated prices to customers who often find it difficult to get to stores.

The investigation found that food items such as chicken drumsticks, corned beef, tuna and chocolate biscuits were sold at highly inflated prices when compared to standard grocery prices.

For example, a 3kg package of chicken drumsticks sold on a truck for $59 would cost a consumer only $12 at the Mad Butcher.

Particularly vulnerable are those who cannot afford the products and are then forced into high-interest loans, which are paid back on a weekly basis.

Customers are often only required to pay minimal amounts, keeping them tied to debts for extended periods of time.

The commercial activities conducted by these mobile shops are nothing new.

In February, the Commerce Commission announced that mobile trader Appenture Marketing (in liquidation at the time) had been fined $114,000 for failing to provide consumers with key contract information.

"In the commission's view, there was genuine public interest in pursuing this prosecution despite the liquidation, as conviction may lead to the return of funds to consumers. It's also important for deterrence," said commissioner Anna Rawlings.

Judge Mary-Beth Sharp described the mobile trader industry as "notorious," strongly denouncing the conduct of the offender in this case.

In another case, decided at the end of the last year, the commission fined Ezitruck trading $126,000 on 16 charges for failing to adequately disclose key information in consumer contracts and register as a financial services provider.

The offending occurred between June and November 2015 when Ezitruck entered into about 3000 contracts with customers for household goods from its truck shop, paid for over time.

"The contracts were difficult to read and the key information was obscured," Rawlings said.

"This meant the documents failed a basic requirement of the law, which is intended to assist borrowers to understand what they are signing up to."

The continuation of these activities indicate that communities remain vulnerable to these companies, despite warnings from the commission dating back more than a decade

As far back as 2007, the commission issued warnings to mobile shop companies Lync NZ Limited, Suny Pacific International Limited, Impact Door to Door Limited and The Good Guys LTd.

At the time, the commission said the four companies failed to disclose important information to customers buying goods on credit, such as credit fees and charges, how and when payments are to be made, default fees, annual interest rates and how they are calculated.

In 2014, the commission also conducted a full report into the mobile trading business, identifying 32 operators across New Zealand.

While there are a number of smaller players in the market, one operator had more than 35,000 customers and more than $7 million in annual revenue.

There was also a group of three associated companies that reported an annual revenue of nearly $22m in the 2013/2014 financial year.

As a consequence of this report, the commission has conducted 12 successful prosecutions, so far resulting in $1.2 million in fines being ordered by the courts.

"One of the offenders, Vikram Mehta, was sentenced to two years' jail, the first ever term of imprisonment in a Commerce Commission case," a commission spokesperson told the Herald.

While the commission hasn't been able to bring an end to mobile trucks, it has focused on ensuring that consumers are accurately informed of what they're agreeing to when they purchase from these trucks.

"The commission's focus is on improving trader compliance with consumer laws, as well as addressing non-compliance through appropriate enforcement action," said the spokesperson.

"We also have a role in educating consumers. We work with a number of community agencies to collect information about the issues their clients are facing and provide them with information that they can use to help educate their clients."

In its efforts to educate consumers, the commission has released a series of informational videos, one of which focuses explicitly on mobile traders.

The commission advises consumers to make sure they look at the small print and take note of all the hidden costs they might be agreeing to.

"Where possible, shop around to see if there is money to be saved by buying elsewhere," the spokesperson said.

"Consumers can also complain directly to the commission. However, the commission is not a dispute resolution body and will not act on every complaint it receives. We note that charging high prices is not illegal under the Fair Trading Act, and the commission can only investigate matters which are potentially a breach of the laws we enforce."