2003 draunisalato award for worst company in Fiji
2003 draunisalato award for worst company in Fiji winner
Courts Fiji Ltd
Courts Fiji Ltd joins British American Tobacco and the Fiji Sugar Corporation as one of the winners for the following reasons:
1. Misleading advertising that lures low-income earners into a cycle of debt
2. Making excessive profit through fixed interest rates
3. Not being sufficiently up-front or clear to customers about terms of conditions of hire-purchases
4. Most complained about company to the Fiji Consumer Council in 2003
5. Unfair repossession policies that unjustly penalise customers
6. Pretending to compete with Burns Philps Homecentres * While Courts Fiji Ltd and Burns Philps Homecentres have since merged, this judgement is on their operations in 2003.
While Courts is not doing anything illegal, they have been chosen for being both aggressive and irresponsible in luring people into their credit and hire-purchase agreements without adequate awareness about the difficult terms and conditions involved.
Several attempts were made to get Courts to provide statistics and information towards the questions and concerns raised by the award, but they refused.
According to the Consumer Council of Fiji, in 2003 Courts Fiji Ltd topped their list as the most complained about company by consumers. Courts is treading a fine line between providing an easy access credit service to poor people in Fiji, and luring poor people into debt with 0 or $1 deposits.
In a country where 30 – 35 percent of people live below the poverty line, we believe Courts is acting irresponsibly given the economic realities of people in Fiji. Through aggressive advertising, they make expensive items seemingly available for little cost when the reality is different.
While we acknowledge the support Courts gives to the community via sponsorship of sporting events, book donations and other schemes, we feel this is funded by the poor of Fiji who are paying Courts unreasonable amounts in interest on credit purchases.
Courts and its subsidiary Burns Philps Homecentres are among the top three companies that take its customers to the Small Claims Tribunal. In 2003 Courts took 180 customers to the Small Claims Tribunal, while Burns Philps took 150 customers. Courts took 254 customers to the Tribunal in 2002, 220 in 2001 and 290 in 2000. Courts won over 90 per cent of their cases in 2003.
While there are several reasons why customers are unable to make their payments, a major trend is that many are unaware of what they are getting themselves into when they sign hire purchase agreements.
A court officer with the Small Claims Tribunal affirmed this, saying the hundreds of cases he has witnessed over the years convinced him that many are ill-informed of their responsibilities as hire-purchase customers.
However, it is necessary to take into account that many customers may try to plead ignorance when they are unable to make their payments.
The Court officer proposed that Courts introduce a stronger awareness programme on the obligations of customers. He believes that the current methods used by Courts to make customers aware of their obligations are simply inadequate and unsatisfactory.
A Magistrate has stated observations of the irate customers who are brought to Court by hire purchase companies to pay the remaining balance of repossessed items. In the Magistrate’s opinion, many are often ill-informed about the obligations they sign on to. But the ruling is usually in Courts favour because the customer has signed the contract agreement.
The Declaration and Agreement of terms and conditions signed by customers and Courts Fiji Ltd is written is such small print (6 - 8 point size helvetica) that it is difficult to read by most estimations.
While many would argue that legal language is often written in such fine-print, writing the terms and conditions in such small print is unbecoming of a company that tries to portray itself as a family friend.
Not only is it difficult to read, it is difficult to be understood by those who cannot read or write English well. Courts does not have written vernacular provisions for indigenous Fijian and Indo-Fijian speaking citizens who make up the majority of its customers.
Courts does require salespeople to read the agreement and explain it to the customer in their language before they sign. But with pressures on salespeople to make sales in order to receive bonuses and commissions, this method is simply inadequate. There is much anecdotal evidence of customers being rushed by salespeople to sign an agreement without adequate explanation. Having the agreement written in the vernacular language would be a more responsible thing to do.
Courts makes every effort to get customers to go on hire purchase agreements and spends tens of thousands of dollars on aggressive advertising. But this is not matched, and not much is visible about awareness and education of the requirements and realities of hire purchases.
It is understood that Courts representatives are going to villages to tell them about their hire purchase policies, but one wonders whether this is awareness-raising, or simply another form of advertising.
Courts was the only company short-listed by the Award that refused point blank to provide answers or statistics to the questions we asked in order to make a better informed judgment of their company. Many attempts were made for an interview with company representatives but were turned down with sarcastic responses. This highlights their lack of regard for public concern towards their operations and actions. Courts is the only one with information about the true nature of their operations but refuses to release this.
Some of the questions that the judges sought answers for to help them assess
Courts Fiji Ltd include:
1) How do they set the prices of their goods? Sometimes prices are discounted so much one wonders how or why it was so expensive in the first place. For instance a Bombay 3 piece Sofa set was originally $2999.00 at Burns Philps and was reduced to $1799.00, a reduction of $1200.00 (ad in Fiji Times 8 March 2004). A 3 piece lounge suite was originally $1699.00 at Courts, but was reduced by $700.00 to $999.00 (ad in Fiji Times, 6 March 2004). Items seem to be reduced by varying amounts (some by half, some by one-third) every week, so why was the price inflated in the first place?
2) How many items do they repossess every year due to customers inability to pay, and what percentage of total customers get their items repossessed? According to the Consumer Council of Fiji, customers are known to have paid off 70 – 80 per cent of the price of their items, but get their items repossessed once they miss a couple of payments. With the interest rates charges, at times customers have paid off above and over the amount of the item in original cash value, before it is repossessed. Courts then sells the repossessed item even though they have profited from the monthly payments and interest rate charges. Further when Courts repossesses items, customers are required to pay for bailiff costs, transport and other incidental costs that Courts incurs while doing this. Not only that, once the item is repossessed, Courts has the power through the agreement to require the customer to pay the difference between the value of the good, and any greater amount payable to Courts. In other words, Courts still tries to make the customer pay the difference between the cost of the good, and the amount recovered from the sale of repossessed items. Other Hire Purchase operators may also be guilty of misleading advertising and taking advantage of the lack of awareness by customers. But Courts has distinguished itself by pretending through massive advertising that it is competing with Burns Philps.
This is false and misleading as Courts owns Burns Philps. The two companies dominate the advertising market for hire purchases in Fiji. They have different ads and different personalities promoting their products, that are essentially similar in nature. They pretend they are competing but in reality share information about customers and customers accounts. They share a customer record database. When you buy a product from Burns Philps it is checked whether you have an account with Courts, and vice versa. If they are really competitors, this should not be allowed to happen. Thus any portrayal of competition is orchestrated.
Burns Philps normally charges 1.7 % monthly interest rates, while Courts charges 1.9 % monthly interest rates. This translates to 20.4 % interest rate or 22.8 % interest rate a year on the goods sold. If the payments are spread over two-three years, the interest rate doubles and triples. In addition, the interest rate is fixed and not based on reducing balance. In the end, the customers may end up paying a total of 40% or 50% interest rates or more on the value of the goods purchased.
Neither company advertises their products as accumulating a 20% or more interest rate a year.
Like the Consumer Council of Fiji, we believe that the Fiji government should not have allowed Courts to purchase Burns Philps Homecentres.
That Courts has the most number of complaints made against it reflects poorly on the company. Not only that, it is a clear sign that its hire purchase policy is not working if it has to resort to taking so many customers to the small claims tribunal and courts and in the process, consume so much time, effort and resources. It is also significant that senior officers from public bodies such as the
Small Claims Tribunal and Consumer Council of Fiji, including a Magistrate, have expressed serious concern about Court’s hire-purchase policies. All agree that changes are needed to protect Fiji’s consumers.
Court is promising people a better quality of life with the illusion of easy access to its products, but in fact the reverse occurs when people are trapped in a cycle of debt through the credit arrangements.
We make the following recommendations:
1. A financial counselling and advice program is introduced for consumers. As a suggestion, the Consumer Council or Small Claims Tribunal could be strengthened or expanded through legislation to provide such a service.
2. The Consumer Credit Act should be strengthened to give customers more rights than they currently have.
3. More resources should be given to the Consumer Council of Fiji to make customers aware of their rights.
4. Courts should also be more truthful and responsible in its advertising.
5. The agreements should be easy to read and understood, and should also be available in the vernacular languages of Fiji.
6. As a corporation whose decisions directly affect the pockets and welfare of citizens, Courts should exercise a wider social responsibility in its operations. It has an obligation to create policies that are fair towards customers and their families. For instance – why should customers pay the transport and bailiff costs when their items are repossessed?
draunisalato award for worst company in Fiji in 2003
The nominations for the inaugural draunisalato award for the worst company operating in Fiji in 2003 were sought from the public through advertisements in both the Fiji Times and Fiji Sun newspaper in November 2003. 16 nominations were received and 12 companies nominated.
The four judges of the award are respected individuals with senior positions in their professions and include academics, heads of development organisations, researchers and social workers. They all hold Masters (MA) qualifications in their particular fields. Research was undertaken on the companies short-listed and the judgements drawn up.
All the companies short-listed were informed and given adequate opportunity to respond to their nomination and the issues raised about them. While the companies nominated reflected a wide-range of company abuse, there was disappointment that some regularly complained about companies were not nominated.
This is perhaps due to consumer apathy in Fiji, or reflects lack of consumer education and awareness of consumer rights. However, being that this was the first time such an award was organised, that 12 companies were nominated is a sign of early success.
There were also difficulties in verifying the facts and reasons behind a few of the nominations. The judges had concerns that some of the nominations could be construed as personal attacks or reflected one persons single experience. Further many of the nominations did not supply much supporting facts to help the judges make their decision, or to try to direct us of where further information could be found.
We hope this will be improved when the nominations for 2004 is called for and people keep records of actions and experiences as part of their citizen and consumer responsibilities. However, the nominations helped put the spotlight on companies, and some of those nominated who did not win, will become the subject of further scrutiny in years to come.
However, the judges were also surprised with the depth and supporting evidence, and analysis provided in some of the nominations. They highlighted some information and perspectives previously unknown. This reinforced the belief that having an award nominated by the public to scrutinize the operations of companies is indeed a positive thing. The judges were convinced that the award should not be about ‘naming and shaming’ but must take companies to task for the way they operate and suggest or demand procedures, process or actions for them to undertake to improve their operations.
award is based on the judges assessment of nominations
received, and is not based on an opinion poll of the public.