BUYER BEWARE BUYER BEWARE

BUYER BEWARE A Consumers’ Guide To Purchasing Goods, Services and Credit Buyer Beware: A Consumers’ Guide To Purchasing Goods, Services and Credit has been produced by the Peninsula Community Legal Centre (PCLC) with funding provided by the Victorian State Government Consumer Credit Fund. The production of this guide reflects the ongoing commitment by both bodies to the protection of consumer rights and the promotion of consumer awareness. Many thanks to Jackie Galloway (Team Leader), David Kinnear and the PCLC Tenancy and Consumer Support Program team (funded by Consumer Affairs Victoria), other PCLC staff who have participated in this project, Tim Gough and Carolyn Bond - Consumer Credit Legal Service, Financial and Consumer Rights Council, Consumer Law Centre Victoria, Ros Horridge and Paul Booth for their input into the content and presentation of this guide. The PCLC also wishes to acknowledge the people who have written, prepared artwork for and supported previous editions of this guide. L L L Acknowledgments Table of Contents Consumer Issues: p4-p24 L About Buyer Beware L Being A SMART Consumer: p5-6 Shop Around Before You Buy L Consumer Contracts: p7-9 Mobile phone contracts Off business premises sales L Consumer Protection: p10-13 Statutory warranties Buying by description Goods sold by sample Poor quality goods Put It In Writing L Unfair Trading Practices: p14-15 Misleading and deceptive conduct Making false representations Unconscionable conduct L General Consumer Issues: p16-19 Price tags Supermarket scanners Unordered goods Goods that are to be delivered Buying Seconds Shopping by post or over the Internet Purchasing Technical Products Top 10 tips for Lay-bys Motor vehicle repairs 2 L Buying a car for private use: p20-24 Before you buy Buying a used car for private use from a licensed motor car trader ~ Cooling Off Period ~ Statutory Warranty ~ Extended Warranties Buying a used car at an auction Buying a used car privately Consumer Credit : p25-40 L The Consumer Credit Code: p25-26 L Using Credit Wisely: p27 L What Information Should You Receive?: p28 L Comparing The Costs Of Different Types Of Credit L Finance Brokers: p29 L Types Of Credit: p30-36 Interest free periods Store cards Using a credit card Borrowing money to buy a car Pawnbrokers Short term (pay day) money lenders L Guarantors: p37-38 L Inability to keep up with repayments: p39 L Repossession: p40 Consumer Remedies : p41-44 L What can consumers do if a problem arises? Communicate with the seller or service provider Put it in writing Get some help Tribunal or court assistance L Preparing For A Hearing At The Victorian Civil and Administrative Tribunal: p45 3 About Buyer Beware This guide has been produced to provide information to consumers who are~ L purchasing goods L purchasing services L using credit or borrowing money to purchase goods or services which are primarily for personal, domestic or household use. The guide looks at~ L L L L common consumer and credit problems consumer rights and obligations action which may be taken to resolve disputes and provides information about where further assistance may be obtained. This guide will assist consumers to L L avoid problems resolve problems which may arise It is recommended that consumers who are experiencing specific problems with the purchase of goods, services or credit obtain advice as soon as possible. HA N HIN DY TS The Ha re are n Hin dy t thr s oug this h gui out pre sen de as ted a like note this 4 L Throughout this guide there are contact numbers &/or suggestions of organisations that can help you. L WHO CAN HELP? Being a SMART Consumer It is far better to avoid problems rather than have to sort them out later. Consider the following points before making a purchase. It may help to save time and difficulties later. S hop around before you buy. In person or by phone. Compare prices, quality and functions. You are entitled to shop around and you are not obliged to buy from any particular retailer M A R T ake the most of your spending power. You can often negotiate a better price when paying cash, especially for larger items. Consider using lay-by rather than buying on credit. sk questions. Be sure that you have all the information you need to make an informed decision about whether to purchase a particular good or service and about who you are buying it from. emember...salespeople are employed to sell things. They may pressure you to purchase goods or sign contracts. Sometimes aggressive tactics are used to get you to sign up without allowing you time to think. Don’t succumb! It’s your money. You have the right to your choices. ake the time to make sure that the item or service you are purchasing will suit the purpose for which you are buying it. Can it do what you want it to do? Is it of the quality you expect? How will the seller or service provider respond if you want to return goods or complain about the quality of the service? 5 Being a smart consumer CONSUMER ISSUES Shop Around Before You Buy L No, Mrs Jones and her son should have compared styles and prices before buying the shoes. The store does not have to offer a refund simply because Mrs Jones changed her mind. 6 L Mrs Jones bought her son new school shoes for $45 at Shoes For You. The next day they saw a pair of shoes in a different shop. They liked these shoes better and the shoes only cost $30. Mrs Jones took the shoes back to Shoes For You and asked for a refund. Did the store have to provide it? Consumer Contracts Whenever you agree to buy goods or services you are entering into a contract. You agree to make payment in exchange for the company providing certain goods or services. L L L L Contracts may be in writing or made verbally. Consumer credit contracts must be in writing. If your contract is in writing - read it thoroughly before signing it. When you make a verbal contract - make sure that you understand all of the things you and the seller are undertaking to do. 7 consumer contracts CONSUMER ISSUES Mobile Phone Contracts Sophia purchased a mobile phone handset from Phones On The Move. She also entered into a two year contract under which she pays a set monthly fee and the cost of calls made. Sophia has found a cheaper deal with another company. She wants to cancel her contract with Phones On The Move. 8 L Telecommunications Industry Ombudsman Ph: 1800 062 058 L WHO CAN HELP? L L Sophie needs to check the termination clause in her contract. In order to cancel it, she may have to pay out the full cost of the contract. L A mobile phone contract is legally binding for the agreed period L If there is a cancellation fee in the contract it may be expensive. Changing companies could ultimately cost you more. L Do not sign an agreement with another company before completing or cancelling an existing contract. If you do, you may be responsible for paying fees and charges under both contracts L Read the entire mobile phone contract before signing it. If you don’t understand a term or condition ñ ask questions L Know who you are entering into contracts with and for what. There may be two contracts. One for the purchase of the handset and the second with the company providing the telephone network. Local Consumer Support Programs Consumer Affairs Victoria Helpline 1300 558 181 If you sign a contract to purchase goods or services at home you may be entering into a contact sales agreement. If you enter into an agreement to purchase goods or services where you and the seller are not physically in the same place, for example over the telephone, you many be entering into a non-contact sales agreement. A door to door salesman came to Jai's home selling vacuum cleaners. Jai needed a vacuum cleaner and signed a contact sales agreement to purchase one. The next day Jai's friend said that she had that brand of vacuum cleaner and would not recommend that anyone purchase one. Jai decided that he did not want to go ahead with the purchase. What can he do to cancel the agreement? L L L L Under contact sales agreements (and non-contact sales agreements) there is a cooling-off period of five business days from the date the agreement is signed. Immediately give the seller notice in writing of the intention to cancel the agreement. Make arrangements to return the goods to the seller or for the seller to collect them. The seller must return any monies which have been paid. If a trade-in was provided, this must be returned to the buyer. L Local Consumer Support Programs Consumer Affairs Victoria Helpline 1300 558 181 WHO CAN HELP? 9 mobile phones & door to door CONSUMER ISSUES Off Business Premises (Door to Door) Sales L Consumer Protection The agreements or contracts between consumers and companies to buy and sell goods or services contain statutory warranties. Statutory warranties are terms of contracts, designed to protect consumers, which legally exist no matter whether a contract is in written or verbal form. They include that: L L L L L L L goods should match their description where goods are sold by sample, the bulk of the goods supplied must match the sample in quality goods should be fit for purpose for which they are sold the seller should have the right to sell the goods the goods should be of reasonable quality services must be provided according to how they are described and with reasonable skill and care materials used in services must be reasonably effective for the purpose for which they are used. Consumers have the right to expect that sellers or service providers will fix up any problems with goods or services which are covered by statutory warranties. The remedy may include repair, replacement or a refund. Some companies may also offer additional voluntary warranties or guarantees. If offered, these are legally binding once they have been agreed to. Hint: It is a g oo to confi d idea agreem rm any ent in writing . L 10 Local Consumer Support Programs Consumer Affairs Victoria Helpline 1300 558 181 L WHO CAN HELP? Buying Goods By Description Jenny bought a bath mat and towels by mail order. According to the description in the mail order catalogue, the accessories should have matched her black and white checked bathroom. However, when they arrived, the towel and bath mat had spots instead of squares. Can she return the goods and receive a refund? Goods Sold By Sample Mr and Mrs Lee bought new floor covering for their kitchen. When the vinyl was delivered to their home they were upset to find that the colouring was lighter than the sample, and patchy. Do Mr and Mrs Lee have to accept this floor covering? Under the statutory warranty L L goods should match their description where goods are sold by sample, there is an implied condition that the goods will correspond with the sample in quality. If they do not, then the consumer is entitled to a refund or to exchange the goods. The consumer should: L L L take action as soon as they realise that there is a problem contact the seller (preferably in writing) to advise of the problem and to propose how it should be resolved (refund/exchange) seek advice and assistance if it is not possible to negotiate an agreement with the seller. L Local Consumer Support Programs Consumer Affairs Victoria Helpline 1300 558 181 WHO CAN HELP? 11 buying by sample or description CONSUMER ISSUES L L Poor Quality Goods Erica purchased a new jumper. The first time she wore the jumper it came apart at the seams. Can Erica ask for a refund from the seller? Local Consumer Support Programs Consumer Affairs Victoria Helpline 1300 558 181 Relevant Industry Associations L WHO CAN HELP? 12 L L Under the statutory warranty L L goods must be of a merchantable or reasonable quality. The consumer can request a refund or may decide to negotiate for repair or replacement of the goods. Hint: It would be helpful to the orig take in receipt al along as proo f purcha of se. Put It In Writing If a problem arises, the consumer will usually try to negotiate a resolution with the seller or service provider. The first step is for the consumer to let the seller or service provider know that there is a problem and to suggest how this could be sorted out. This is often best done in writing. The following outline indicates the main points to be covered in a letter to a seller or service provider. Owner/Principa l Name Business/Com pany Name Address Date Dear .., 1. Quote receip t/tax invoice nu mber, briefly describe good s/services and note when purchased wrong with th e goods/service s 3. State what yo u want the selle r/service provider to do about it 4. State that yo u want a satisfa ctory, preferab written, respon ly se within a ce rtain period (fo example 7 or r 14 days) 5. State that if no satisfactory response is received by th at date that fu rther advice w be sought and ill that an applicat ion may be made to the Ci vil List of the Victorian Civi and Administra l tive Tribunal fo r a resolution of dispute, appr opriate orders and disbursements. Yours faithfully , -------------------Your name an ------------ d signature. (Place your re turn address an d phone numbe r here). 13 poor quality goods / writing letters 2. State what is CONSUMER ISSUES Unfair Trading Practices The law also protects consumers against unfair trading practices. These may include: Misleading and deceptive conduct Craig purchased an engagement ring for his girlfriend. The salesperson told him that the ring was made of 18 carat gold. When Craig had the ring independently valued for insurance purposes, he was told that the ring was made of 9 carat gold and that it was worth considerably less than he paid for it. Making false representations in relation to the sale of goods and services A trader advertises ìmagic pills" to promote hair regrowth for people who are becoming bald and indicates that independent clinical trials were conducted. Following complaints from consumers that no signs of regrowth had occurred after the recommended period, independent clinical trials were conducted by the relevant government department. These proved that the ìmagic pills" were sugar pills and had no therapeutic value in promoting hair regrowth. L 14 L L The trader may be guilty of making a false representation. Hint: Intentio n is not re q in orde uired r to prove th a mislead t in decepti g or ve conduc t has tak en place. L Unconscionable conduct A salesperson visited Mr Jones' home. He said that his company was in the area for a short period and was offering to the paint the exteriors of houses for “very reasonable” rates. Mr Jones told the salesman he was eighty five and legally blind. He had not noticed the need for painting but would talk it over with his daughter. The salesman became quite pushy, saying that the company would only be in the area for a few more days and that some of the neighbours had commented on how shabby the house had become. Mr Jones became very upset, he signed a contract to have the house painted and asked the salesperson to leave. Hint: Unfa practice ir trading individu s may affect groups oals, certain people, r categories of communor the whole. A ity as a seek red ction to against ress u trading nfair practice may be s taken at number a levels. of L Australian Competition & Consumer Commission Infoline: 1300 302 502 L WHO CAN HELP? Local Consumer Support Programs Consumer Affairs Victoria Helpline 1300 558 181 15 fair trading/unconscionable conduct L Mr Jones may seek redress to have the contract cancelled on the basis that the salesperson used unfair tactics and pressure to force him to sign the contract. CONSUMER ISSUES L General Consumer Issues M Price Tags If an item has an incorrect price marked on it, and that price is lower than the price being charged by the seller for the goods, the buyer cannot demand that they be able to pay the lower price. The buyer can offer to pay the lower amount but the seller does not have to accept this amount. M Supermarket Scanners Under the Retail Traders Association Scanning Code of Conduct, if an item is incorrectly scanned at a higher price that item should be given to the buyer free of charge. If more than one item is scanned at the incorrect price, the first will be provided free and the remainder will be charged at the lower price. M Unordered Goods If you receive unordered goods you are not required to pay for them. If details are available, you should notify the sender that you have received the goods and advise how the goods can be collected. You should take reasonable care of the goods while they are in your possession. If the company has not taken action to recover the goods within one month of your written notice, or within three months of you having received the goods, whichever comes first, the goods become your property. M Goods that are to be delivered When ordering goods that are to be delivered to your home, ensure that an agreed delivery date is specified on the docket. M Buying Seconds 16 If you purchase “seconds”, goods that are sold at a discounted price because of identified flaws or damage, you are not legally entitled to a refund just because you decide later that you do not want a damaged product. Consumers may find that purchasing goods by mail order or over the Internet is convenient, cheaper and provides greater choice of products. Consumers are entitled to have their rights protected no matter from where they purchase goods or services. However, when the seller is in another state or country, only contactable via email or a post office box address, or when you do not know exactly who the seller is, trying to assert your consumer rights may be difficult. Before buying by mail, phone or over the Internet: L try to check whether you are dealing with a legitimate and reputable company (check the Australian Securities and Investments Commission website www.asic.gov.au) L L ensure that you have contact details for the company ask about returns, refunds and repairs policies a local supplier L consider possible costs and charges compared to buying directly from Purchasing Technical Products Before buying technical products, such as computers, ask the following questions: L What is its lifespan? capacity for the purpose for which it is required? L Does it have sufficient memory/other L How are repairs done? Onsite? Product sent away? Hint: Consid er security issues before providin g credit d your etails over th e phone or interne t. L Does your insurance cover the product if it is taken out of your home? L Do warranties provide for onsite repairs? L Local Consumer Support Programs Consumer Affairs Victoria Helpline 1300 558 181 WHO CAN HELP? 17 general/shopping by post & internet CONSUMER ISSUES Shopping by Post or over the Internet Top 10 Tips for Lay-bys 1. The lay-by statement provided to the customer by the supplier must include a description of the goods and must be signed by both the supplier and the purchaser. 2. The statement must detail the price of the goods. 3. The statement must include the first payment made and the amount outstanding. 4. The statement must detail when other payments are due. 5. The statement must outline any cancellation charge, or how such a charge will be calculated. 6. The cancellation charge cannot exceed reasonable selling costs (including storage and administrative fees) and the amount equal to any loss of value of the goods ñ the onus is in the supplier to prove both. 7. A customer can cancel a lay-by at any time before the goods are delivered, or if the goods are delivered damaged. 8. The supplier must refund all money within 14 days, minus any cancellation charge. 9. The supplier can only cancel the lay-by if it stops trading, if the customer breaches a condition of the contract or if the goods are no longer available. 1 .If the supplier cancels the lay-by (unless 0 there is a breach by the customer), then all money must be refunded and no cancellation fee charged. The above information is taken from the Top 10 tips for Lay-bys pamphlet. The pamphlet is produced by Consumer and Business Affairs Victoria / Department of Justice Victoria which have kindly provided permission for the material to be reprinted in this publication. L 18 Local Consumer Support Programs Consumer Affairs Victoria Helpline 1300 558 181 WHO CAN HELP? Before you agree to have repairs done on your car ask the repairer to provide: L L L M M M M M M M a written list of necessary repairs a written and itemised quote for the cost of repairs an indication of items where possible variations in cost may occur If you don’t understand something, ask questions. Tell the repairer what repairs you want done. Make it clear to the repairer that you should be contacted to authorise any further work before it is done. If parts are to be replaced, ask the repairer to return the old parts to you. Ask for an itemised invoice showing the jobs done and how much the parts and labour cost. Get a receipt and keep it. Remember, if your car is under warranty, you may be required to take it to a repairer approved by the seller or the manufacturer. L Consumer Affairs Victoria Helpline 1300 558 181 Victorian Automobile Chamber of Commerce Ph: (03) 9829 1111 L WHO CAN HELP? Local Consumer Support Programs Community legal centres 19 lay-bys / motor vehicle repairs Ask about warranties on parts and labour, have these noted on the invoice/receipt. CONSUMER ISSUES Motor Vehicle Repairs Buying A Car For Private Use Before You Buy L Get an idea of the current market value of your preferred car. Check the classified sections of daily papers, look in the Trading Post or compare prices at car yards. Newsagents sell regularly updated magazines which provide an indication of the current market value of vehicles L Consider all of the costs involved in buying a car and getting it on the road. As well as the purchase price, you will also be required to pay for registration fees, Transport Accident Commission charges, government stamp duty and insurance. You may have to pay transfer and number plate fees, for a pre-purchase mechanical inspection and for costs associated with borrowing money (See page 33) Shop around, compare prices and what you may be offered for a trade-in. If you are in a position to do so, you may be able to negotiate a better price by offering to pay cash L L Compare the benefits and risks of purchasing a L Consider getting an independent pre-purchase vehicle from a licensed motor car trader, private seller or auction mechanical inspection done. Just because a car has a roadworthy certificate it does not necessarily mean that it is in good condition! You can make a contract subject to a satisfactory roadworthy test 20 L Try not to make decisions when you are with a salesperson. Remember, it is their job to make sales and profits! L Read any contracts or agreements carefully. Once you sign them they are legally binding. Don’t sign if you don’t understand any part of the contract. If you are concerned about certain terms in a contract you can try to get them taken out or changed before you sign it. Get some independent advice. If you have to borrow money to buy the car, make sure that any agreement or contract is subject to you obtaining finance from your preferred finance provider. If you are buying the car privately, it is your responsibility to ensure that no one else is owed money in relation to the vehicle and that the vehicle is not stolen. Contact the Vehicles Securities Register and ask if the car has clear title. Vehicles Securities Register Ph: 131 171 Country Callers 1800 814 726 L L NEED HELP TO UNDERSTAND A CONTRACT? Local Consumer Support Programs Community legal centres Consumer Affairs Victoria Helpline 1300 558 181 L 21 buying cars for private use CONSUMER ISSUES Buying A Car For Private Use (continued...) Buying A Used Car For Private Use From A Licensed Motor Car Trader Cooling Off Period M When you agree to buy a used car from a trader you will sign an Agreement for Sale. Under this agreement, you have a three day cooling off period during which you can change you mind. This does not include Saturday or Sunday or a public holiday You can cancel the agreement by giving the trader notice in writing before the end of the cooling off period and returning the car if you have it If you cancel the agreement within the cooling off period, the trader must repay all monies paid by you, excluding $100 or 1% of the purchase price whichever is greater, and return any vehicle which you may have traded in as part of the agreement Usually, you would not take the car from the car yard until the three day cooling off period has finished. If you do and the car is damaged, you will be liable for the cost of any repairs M M Hint: Consid er security issues before providin g your cre dit card details over th e phone or Interne t. M 22 M If you want to take the car at straight away or during the cooling off period the trader may ask you to sign a Waiver Form. If you sign the Waiver Form and take the car immediately, the cooling off period is cancelled and you cannot change your mind The cooling off period provides some protection for the buyer, think very carefully before you sign this away. You may have to sign a number of forms, be careful that you don’t sign the Waiver Form or a Business Purposes Declaration without meaning to If you have borrowed money to buy the car and you decide not to go ahead with the purchase, you may have to deal with cancelling the credit contract separately (See page39) If you cancel the agreement to purchase the car outside of the cooling off period or without a legally acceptable reason, you may lose your deposit or trade-in and possibly be liable for losses incurred by the trader M M L Consumer Affairs Victoria Helpline 1300 558 181 The Motor Car Traders Licensing Authority Ph: 9627 6299 WHO CAN HELP? L Local Consumer Support Programs Community legal centres 23 buying a used car Hint: See pa ge for info xxx rm about b ation uying a car usin g credit M CONSUMER ISSUES Hint: There is n cooling o off period when purcha sing a new ca r, buying a at aucti car on or throug ha private sale. Buying A Used Car For Private Use From A Licensed Motor Car Trader (continued...) Buying A Used Car For Private Use From A Licensed Motor Car Trader (continued...) Statutory Warranty M M M M M M M If the car is under ten years old and has travelled less than 160,000 kilometres, it will be covered by a three month or 5,000 kilometres statutory warranty Used cars which have travelled more than 160,000 kilometres and/or which are over ten years old are not covered The statutory warranty is required by law and exists even if it was not discussed or written into the sale agreement During the warranty period, the trader must make repairs necessary to maintain the car in a reasonable condition relative to its age Some faults are not covered by the warranty Damage caused by you may not be covered by the warranty The warranty may require you to get services and repairs done by approved repairers Extended Warranties L L L Traders may suggest that you buy an extended warranty for your vehicle This warranty would provide for specified repairs to be carried out by the trader for a period longer than that covered by the statutory warranty You should consider the length and type of cover and weigh up the benefits and costs before paying for an extended warranty L 24 Consumer Affairs Victoria Helpline 1300 558 181 The Motor Car Traders Licensing Authority Ph: 9627 6299 WHO CAN HELP? L Local Consumer Support Programs Community legal centres Buying A Used Car At An Auction If you buy a car at an auction: L L L L L L It may not have a roadworthy certificate You will probably not be able to test drive it, but you can start it and inspect it It will not be covered by a statutory warranty There is no cooling off period The auction company is responsible for ensuring that the car is legally available for sale and that no money is owing on it You will have to arrange a roadworthy certificate and for the transfer of ownership and registration of the car. Buying A Used Car Privately If you buy a car privately: M M There is no cooling off period It is your responsibility to make sure that the person selling the car is the owner and that no money is owing on it (Check with the Vehicle Securities Register Ph:131 171 Country Callers 1800 814 726) The seller should arrange the roadworthy certificate It is a good idea for you to have the car mechanically tested before purchasing it make the sale conditional upon a satisfactory mechanical test You will be responsible for arranging the transfer of ownership. M M M 25 buying a used car M It is not covered by a statutory warranty CONSUMER ISSUES The Consumer Credit Code Most consumer credit contracts which have been entered into in Victoria since the 1st of November 1996 are subject to the Consumer Credit Code. The Code is consumer protection legislation. It regulates most forms of lending by companies such as banks, credit unions and finance companies to consumers for personal, domestic or household purposes. In Victoria, the Code forms part of the Consumer Credit (Victoria) Act 1995. Consumer credit contacts entered into before 1 November 1996 for amounts of $20,000 or less, may be covered by the Credit Act. Consumer Credit Contracts When a person takes out a loan, enters into a finance agreement or arranges to access credit facilities such as credit and store cards, they are entering into a consumer credit contract. 26 Using Credit Wisely Before entering into a credit contract: L L L L compare the types of credit which are available and the costs and conditions associated with each shop around for the best deal, don’t feel pressured into accepting the first credit contract which is offered read the contract and make sure that you understand your obligations under it, don’t sign unless you understand ensure that you are clear about the charges, fees and repayments for which you will be liable - ask what the total cost will be find out how you can cancel the contract and what will happen if you stop making payments you may be offered associated products such as consumer credit insurance, consider the cost compared to the benefits don’t borrow more than you need - think carefully about what limit to place on you credit or store cards L L L If you don’t understand the contract or are unsure about how much you will be required to pay, get some advice. L Community legal centres Consumer Affairs Victoria Helpline 1300 558 181 WHO CAN HELP? L Credit Helpline Ph: (03) 9602 3800 Country Callers 1800 803 800 Local Consumer Support Programs 27 credit code / using credit CONSUMER CREDIT What Information Should You Receive? The Consumer Credit Code places importance on consumers having all the information they need in order to make an informed decision. M Before a credit contract is entered into, the credit provider, must give the borrower a statement which gives details about the proposed contract. The details to be provided are set out in section 15 of the Code. These details include information such as the interest rate, fees and charges and the amount of repayments. The credit provider must also give borrower a copy of “Things you should know about your proposed credit contract” - a form which outlines the borrowers’ legal rights and obligations If the borrower goes ahead with the loan the person will sign a credit contract and should receive a copy of the signed contract. M M If the credit provider does not provide the required documents and details and the borrower is in someway disadvantaged because of this, it may be possible to make a claim against the credit provider. Hint: Cre dit contr acts must be in A contra writing. ct may consist o fm one docu ore than m terms co ent. The nta in all of th ined e documen ts legally b are ind even if o ing, nly one of th em has been signed. L 28 Community legal centres Consumer Affairs Victoria Helpline Ph: 1300 558 181 WHO CAN HELP? L L Credit Helpline Ph: (03) 9602 3800 Country Callers 1800 803 800 Local Consumer Support Programs Comparing The Cost Of There are a range of credit providers and many different forms of credit. It is recommended that consumers compare the full costs and conditions associated with various types of credit prior to entering into a contract. M When comparing the full costs of different forms of credit it is important to consider: the interest rate fees and charges how long the loan will run (therefore how much interest you pay) the total amount of all repayments which you will have to make. M M M M Finance Brokers Finance brokers negotiate consumer credit for people for a fee. These services are regulated by the Consumer Credit (Victoria) Act 1995. Remember: M M M Consumers may still have to pay a fee to the broker regardless of success in obtaining finance There is no guarantee that the broker will be able to arrange a better deal than the consumer could on their own behalf Using a broker does not provide increased consumer protection Credit Helpline Ph: (03) 9602 3800 Country Callers 1800 803 800 Local Consumer Support Programs Community legal centres Consumer Affairs Victoria Helpline 1300 558 181 WHO CAN HELP? L L 29 comparing credit costs CONSUMER CREDIT Different Types Of Credit Types of Credit Interest Free Periods Metro Home Appliance Centre Pty Ltd advertised that, for a limited time, customers could “buy now and pay no interest for six months”. Mr and Mrs Logan needed a new refrigerator. They decided to take advantage of this offer. A salesman at the store helped them to arrange finance, to be repaid over two years, from the XYZ Finance Company. WHO CAN HELP? 30 L L L L Regular minimum repayments will be due from the start of the contract. The consumers should not wait for further ìpaperworkî to arrive. Often, after signing and receiving a copy of the contract, consumers will receive no further information until just before the contract is due to finish. Unless the full balance owing is paid out at the end of the six month period, the consumers may find that they will be charged interest from the time that the credit contract was entered into. Interest rates may be very high. Under some credit contracts, the consumers may have to pay penalty charges if the loan is paid out early. L L L Credit Helpline Ph: (03) 9602 3800 Country Callers 1800 803 800 Local Consumer Support Programs Financial counsellors Community legal centres Consumer Affairs Victoria Helpline Ph: 1300 558 181 Store Cards L L L L Make sure that you understand the terms and conditions of using a store card Although you may apply for the card through a particular shop, you may actually be entering into a credit agreement with a completely different company Read the fine print carefully Many store cards operate the same way as credit cards - regular statements are issued and minimum monthly payments are due, high interest rates (up to more than 20% per annum) are charged on outstanding monthly balances The store may offer incentives for people to become store card holders such as invitations to special events, these should be carefully weighed up against the cost of this form of credit L Credit Helpline Ph: (03) 9602 3800 Country Callers 1800 803 800 Local Consumer Support Programs Financial counsellors Community legal centres Consumer Affairs Victoria Helpline Ph: 1300 558 181 L Hint: Do not rely on advice from sto sales p re eople. Obtain indepe ndent advice before signing up for a store c ard. WHO CAN HELP? L 31 credit types / store cards L CONSUMER CREDIT Using A Credit Card Oscar has recently applied for a credit card from his bank. He has never had a credit card before. What does Oscar need to be aware of when he uses the credit card? Consumer Affairs Victoria Helpline Ph: 1300 558 181 Australian Banking Industry Ombudsman Ph: (03) 9613 7333 Country Callers 1800 337 444 WHO CAN HELP? 32 * Research undertaken by the Consumer Credit Legal Service shows that if you owe $5,000 and only make the minimum repayments, “it will take 4.5 years (54 months) to get the debt down to $2,500 and over 10 years (127 months) to pay off the remaining $2,500!” * Research conducted by Carolyn Bond for Consumer Credit Legal Service in March 2000 L L L M M M M M M Monthly statements will provide information as required by the Consumer Credit Code Statements should be checked, particularly the transaction record, to ensure that it is accurate Unless the full amount owing on the card is paid each month, the consumer will be paying high interest rates on the outstanding balance Interest may be charged on cash advances from the time that the funds are accessed Many credit card providers charge an annual fee Consumers should be cautious about taking up offers to increase the credit limit on the card Hint: T he monthly minimum repaym ent amount is a rea l minimu m. Unless yo addition u make al paymen ts you may fin d that your de bt escalate s due to interest charges .* M If the consumer exceeds the credit limit on the card the bank may require that the excess be repaid immediately Credit Helpline Ph: (03) 9602 3800 Country Callers 1800 803 800 Local Consumer Support Programs Financial counsellors Community legal centres L Borrowing Money to Buy A Car For many people, buying a car is one of the most expensive purchases they will make. Many people need to borrow money in order to buy a car. The decision about where to borrow from could make a big difference to the total amount that is ultimately paid. M If possible, shop around and compare forms of credit and credit providers before you agree to buy a car. Talk to different credit providers, find out about your rights and obligations, ask them to work out what the overall cost of a loan would be, get an idea about whether they would be prepared to lend you money if you applied to them If you have a preferred credit provider and form of credit try to arrange tentative approval for a loan ñ this way you can go looking for cars knowing that you will be able to borrow up to a certain amount Don’t be pressured! Many motor car traders offer to arrange finance for approved customers. This usually means that they have a deal with a credit provider and may get a commission for any new credit contracts which they arrange. Not only does the trader make money out of selling the car, they also make money out of arranging loans for customers. It may suit the trader to arrange your loan - but is it in your best interest? Don’t be pressured! You may have finally found your “dream car” or it may be that “cars like this don’t come up for sale very often” or that “the car will never be available at this price again”. Don’t make decisions to buy or to borrow money while with the salesperson or on the “spur of the moment”. Take some time to consider the purchase and read through the contract(s). Don’t sign anything you don’t understand! Get some independent advice. M M M M continued overleaf... 33 borrowing $$ for a car CONSUMER CREDIT L L L M If you have not arranged a loan prior to signing a contract to buy a car, ask for a clause such as “Subject to the buyer obtaining finance from his/her preferred credit provider” to be included in the contract. Check to make sure it is there before you sign If you enter into a contract to buy a used car and decide during the ìcooling off" period not to go ahead with the purchase, you may need to deal with the credit provider separately to cancel or defer the loan. You may incur cancellation fees and charges If you borrow money to buy a car the motor car trader or the credit provider may require you to take out comprehensive insurance on the car. This is also likely to be the case if a mortgage has been taken over your house to secure the loan. You do not have to take up insurance offered by the trader or credit provider, shop around The motor car trader or credit provider may also suggest or encourage you to buy associated insurances such as income protection or consumer credit insurance. In most cases, these insurances are not compulsory and often do not provide good value for your money. Think very carefully and obtain advice if necessary before agreeing to purchase additional insurance (See pages 21 to 26 for more information about buying a car.) M M M Community legal centres L 34 Consumer Affairs Victoria Helpline Ph: 1300 558 181 Australian Banking Industry Ombudsman Ph: (03) 9613 7333 Country Callers 1800 337 444 L WHO CAN HELP? L L Credit Helpline Ph: (03) 9602 3800 Country Callers 1800 803 800 Local Consumer Support Programs Pawnbrokers Joseph needs to get some cash quickly. He is thinking about taking his stereo sound system to the pawnbroker, getting cash for it now and then “buying it back” in a few weeks when he is in a better financial position. The pawnbroker ~ L L L L L L will require proof of identity from a person wanting to pawn goods must display a sign which shows the maximum amount charged weekly and monthly, and stating any special circumstance in which a higher rate may be charged must keep accurate records of all loans and associated charges must give the person pawning the goods a written pawn ticket which shows the amount of the loan, period of the loan and charges associated with the loan must also provide written information about how goods may be redeemed and about what action the pawnbroker can take if the pawned goods are not redeemed The consumer ~ L L must repay the loan and additional charges within the agreed period of time in order to “buy-back” the pawned goods may be able to take action against the pawnbroker if he/she believes that they have been disadvantaged because the pawnbroker has acted unjustly or has breached the Second-Hand Dealers and Pawnbrokers Act 1989. Country Callers 1800 803 800 Local Consumer Support Programs Community legal centres Consumer Affairs Victoria Helpline Ph: 1300 558 181 WHO CAN HELP? L Credit Helpline Ph: (03) 9602 3800 L 35 pawnbrokers may sell the goods if the loan and charges have not been repaid within the agreed time period. CONSUMER CREDIT L Short Term (Pay Day) Money Lenders Alice needs some cash to tide her over until she gets paid next week. She borrows money from a company which provides short term loans. Alice signs a direct debit authority which means that the credit provider can withdraw money for repayments from her bank account on agreed dates. L L L L L Country Callers 1800 803 800 Local Consumer Support Programs Community legal centres Consumer Affairs Victoria Helpline Ph: 1300 558 181 WHO CAN HELP? 36 L L L all short term lenders must be registered as credit providers this type of short term loan may be covered by the Consumer Credit Code the credit provider must give the borrower an information statement about the borrowers' rights and obligations and a pre-contractual statement which provides details about the terms and conditions of the credit contract charges and fees may be very high if the consumer cannot keep up with the repayments, additional costs such as debt collection charges may be added to the amount owing. Hint: Ma k understa e sure that you n of your d the conditio ns lo about h an & are clear ow muc h extra you’ll h av Pawnbro e to pay back. k term mo ers & short n charge ey lenders ve interest ry high ra into acc tes. Taking ou cost of nt the total th includin e credit g interest fees & c the effe harges, cti interest ve rate for a short term loan ma y as high be as 1000%! L Credit Helpline Ph: (03) 9602 3800 Guarantors L L By agreeing to be a guarantor, David’s father agrees to be responsible for the repayments if David cannot or will not continue to pay them He may feel under pressure from David or the bank to agree to become the guarantor. However, David’s father should not agree or sign any documents until he has considered the financial risk and is clear about what his obligations would be continued overleaf... 37 term $$ lenders / guarantors David wants to buy a new computer and printer. He is a TAFE student and works part time at a local fast food shop. David applied to his bank for a loan. The bank was concerned that David may not be able to keep up with the loan repayments. The bank said it would provide a loan on the condition that someone acceptable to the bank agrees to guarantee the loan. David asks his father if he would be the guarantor. CONSUMER CREDIT L L L L Guarantors (continued...) Community legal centres L 38 Consumer Affairs Victoria Helpline Ph: 1300 558 181 Australian Banking Industry Ombudsman Ph: (03) 9613 7333 Country Callers 1800 337 444 L WHO CAN HELP? L L L L L It is advisable that he obtain legal advice before agreeing to be a guarantor The bank should provide David’s father with a copy of the proposed credit contract and a copy of Things You Should Know About Guarantees before he signs a guarantee If and when he does enter into the guarantee, he should receive a copy of the guarantee and of the credit contract from the bank within two weeks If problems arise with repayments or there are concerns about the guarantee, David and his father should obtain advice and act as quickly as possible. Hint: If David h his fath ad asked er a co-bo to be rr both w ower, ou signed ld have th contrac e credit t and b oth would ha equally ve been respon sible for rep ay from th ments e the con time tract was en tered into. Credit Helpline Ph: (03) 9602 3800 Country Callers 1800 803 800 Local Consumer Support Programs L L L If you are unable to keep up with repayments, in either the short or long term: L L L L It will be far better to take action rather than ignoring the problem and hoping that it will go away Obtain professional advice Contact the credit provider and try to come to an arrangement - perhaps repayments could be decreased or deferred for a period of time If you get behind with the repayments the credit provider will send you a default notice. It will state what the problem is and what the credit provider requires you to do to fix it up. If you have not done so already, it is important that you contact the company to discuss the problem If you do not respond to the default notice or if you and the credit provider are not able to reach an agreement about what to do, the company may take action such as suing you or repossessing mortgaged goods If you believe that the credit provider has been unreasonable, for example, in not agreeing to vary the contract, you may be able to take the matter to the Victorian Civil and Administrative Tribunal. L L Credit Helpline Ph: (03) 9602 3800 Country Callers 1800 803 800 Community legal centres Australian Banking Industry Ombudsman L Australian Banking Industry Ombudsman Ph: (03) 9613 7333 Country Callers 1800 337 444 L WHO CAN HELP? Consumer Affairs Victoria Helpline 1300 558 181 39 repayments L CONSUMER CREDIT Inability To Keep Up With Repayments Repossession For some loans, credit providers will take out a mortgage over goods such as your home or car. M M The mortgage has to be in writing. It may form part of the credit contract. If a default notice has been issued, the default period has expired and the default has not been addressed, the credit provider may seek to repossess mortgaged goods. This must be done in accordance with the Consumer Credit Code. Hint: The cre dit pro vider o agents r its cannot enter y residen our tial pre mis (withou t your p es ermiss to repo ion ss Howev ess your car. ) er, they can take po ss it anyw ession of here els e. For exa m parked ple - while on the street o utside your ho m at the s e, hoppin g centre or outside of your workpla ce. continued opposite... L L L 40 In order to repossess mortgaged goods from your home: M M M the credit provider must have your permission in writing or have permission to do so from the Victorian Civil and Administrative Tribunal. the credit provider may also obtain an order from VCAT which requires you to return the mortgaged goods to the company at a certain place and time. the credit provider must write to you within fourteen days of repossessing the goods. As well as providing information about your rights and obligations, the written notice will put an estimate on the value of the goods and advise of any further costs. twenty one days after the written notice has been given the credit provider can sell the goods. It must sell them as soon as possible and try to get the best possible price. if the amount obtained by selling the goods is less than that owing on credit contract, the credit provider can sue you for the difference. If you believe that the finance company has not acted properly, seek advice - you may take the matter to the Victorian Civil and Administrative Tribunal. M M L Country Callers 1800 803 800 Local Consumer Support Programs Community legal centres Consumer Affairs Victoria Helpline Ph: 1300 558 181 WHO CAN HELP? L Credit Helpline Ph: (03) 9602 3800 L 41 repossession CONSUMER REMEDIES Repossession What Can Consumers Do If A Problems Arises? The rights of consumers are defined and protected by State and Federal laws. When a problem arises, it will be up to the individual who has the problem to take action to try to sort it out. Once you realise that there is a problem it is important to take action as quickly as possible. If you are unsure about your rights, obligations or what action you can take you should seek advice. Communicate With The Seller Or Service Provider L L Inform the seller, service provider or credit provider that there is a problem. Return the goods to the seller or ask the tradesperson to come to your home to see the problem. If you still have it, show your receipt as proof of purchase. Clearly and politely explain the problem. Explain what you think should be done. Listen to what the seller suggests. Where goods are faulty or not suitable for the purpose for which they were purchased, the consumer will usually be entitled to a refund. However, you may prefer to negotiate to exchange the goods, or have the goods repaired or to receive a credit note. Contact the credit provider, outline the problem and propose a reasonable course of action. Many consumer problems can be resolved at this stage. L L L L L L 42 L L L L L Writing a letter also creates a record of the problem and/or your complaint. This will be useful if you need to take more formal action later on. The consumer is required to put things in writing in some cases. For example, if you want to cancel a contact sales agreement. Keep a copy of any letters you write and of any correspondence received from the company. Ensure that you keep any receipts and guarantees. Keep notes about phone conversations, visits to and from the sellers, service providers or credit providers. 43 put it in writing Write a letter to the seller, service provider or credit provider. Describe the problem and how you think it should be resolved. Letters are often taken more seriously than verbal complaints. CONSUMER REMEDIES Put It In Writing Get Some Help If you are not able to resolve the problem directly with the supplier, service provider or credit provider you may decide to get some help. L Contact the consumer support program in your area, a financial counsellor, a community legal centre, the relevant state or commonwealth government department , the relevant industry ombudsman or industry association /complaints body. (See pages 46-48) L These organisations will provide information, advice and assistance. They may be able to formally take up your complaint or problem. Tribunal Or Court Assistance L If you have not been able to resolve your consumer problem through negotiation with the seller, service provider or credit provider, you may decide to take the complaint to a court or tribunal. Alternatively, it may be that the seller, service provider or credit provider initiates proceedings against the consumer. L Depending on the type of problem and the amount of money involved, consumers will probably go to the Civil Claims List or the Credit List of the Victorian Civil and Administrative Tribunal (VCAT) or to the Magistrates’ Court. L It is recommended that consumers obtain some advice before starting or defending proceedings in VCAT or court. 44 at the Victorian Civil and Administrative Tribunal Consumer Credit Matters Usually both parties in a consumer credit matter being heard at the VCAT will have legal representation. It is very strongly recommended that you seek advice and assistance in relation to initiating and responding to proceedings in relation to consumer credit matters. Consumer Matters Consumers deciding to take a matter to the Civil List of the Victorian Civil and Administrative Tribunal (VCAT) must complete an official application form. An Application to Civil Claims List and a Civil Claims Guide are available from VCAT and from Magistrates’ Courts. The guide provides very useful information about how to fill in the application form and about preparing for the hearing. Usually, a consumer will represent him or herself at the VCAT Civil Claims List hearing. It is important to be very well prepared: L L L L ensure that all relevant documents are available - receipts, invoices, copies of correspondence. It may also be helpful to: take photographs or a videotape of the problem obtain and independent report regarding the problem and quotes for the cost of resolving the problem arrange for witnesses to attend the hearing in person or to provide statutory declarations. Country Callers 1800 803 800 Local Consumer Support Programs Community legal centres Consumer Affairs Victoria Helpline Ph: 1300 558 181 WHO CAN HELP? L Credit Helpline Ph: (03) 9602 3800 L 45 get some help L L make a list of the main points and of the remedy being sought write down a history of the problem and what has been done to try to resolve it - dates, action taken, people involved and what was said CONSUMER REMEDIES Preparing for a Hearing Where To Get Help Organisations which can assist with consumer and consumer credit problems L L Consumer Support Programs Consumer support programs are community organisations which operate across Victoria providing advice and assistance to consumers. For details about your local program contact Consumer and Business Affairs Victoria or the Financial and Consumer Rights Council, see below. L Consumer and Business Affairs Victoria 452 Flinders St, Melbourne 3000 Helpline 1300 558 181 Website: www.consumer.vic.gov.au A state government agency which provides consumer information and advice via a telephone hotline, in person, and through a website. CBAV can refer consumers to their nearest consumer advice service. L Financial and Consumer Rights Council Inc. Ph: (03) 9614 5433 Country Callers 1800 134 139 The FCRC is the peak body for agencies and individuals concerned with the rights of low income and vulnerable consumers. The FCRC can refer consumers to their nearest consumer advice service or financial counsellor. continued opposite... L L 46 L Credit Helpline 10am-1pm & 2-4pm Monday to Friday Ph: (03) 9602 3800 Country Callers 1800 803 800 Credit Helpline provides free, independent telephone advice regarding credit and debt problems to consumers and community workers in Victoria. The Credit Helpline can refer people to other relevant community and legal services. L Federation of Community Legal Centres (Vic.) Inc. Ph: (03) 9602 4949 The Federation is the peak body for Victoria’s community legal centres. The Federation can refer consumers to their nearest community legal centre. L Consumer Credit Legal Service Undertakes litigation on behalf of clients referred from the Credit Helpline, financial counsellors and community legal services. L Victoria Legal Aid Ph: 9269 0234 Website: www.legalaid.vic.gov.au Provides a telephone information service in English and 12 other community languages ph: (03) 0269 0120 Country Callers 1800 677 402. In person information, advice and assistance may be available from offices located in Melbourne, suburban and regional areas throughout Victoria. L L continued overleaf..... 47 where to get help / contacts Ph: (03) 9670 5088 CONSUMER REMEDIES L L Where To Get Help L Australian Competition and Consumer Commission ACCC Infocentre - infoline: 1300 302 502 Website: www.accc.gov.au A Federal Government agency which can assist with inquires and complaints regarding consumer protection matters on a national level. Equal Opportunity Commission Ph: (03) 9281 7100 If a consumer believes that he or she has been directly or indirectly discriminated against, the Equal Opportunity Commission may be able to provide assistance. Industry Ombudsmen and Complaints Bodies Many industries and professions have established complaints and dispute resolution mechanisms which can be used by consumers. Check the telephone book or ask one of the above organisations for information about how to contact the relevant ombudsman or complaint body. 48 L