In September 2017, a mobile trader called at Mihirangi’s home and sold her a combination deal of a lounge suite, coffee table, rug, television, and phone. The total cost of the goods was $5,150 to be paid at $85.83 a week over 60 weeks. The goods were to be delivered after 24 weeks.
Mihirangi began to default on her payments in December 2017 and January 2018. By this time, she had paid the mobile trader $1,029.60.
Mihirangi wanted to cancel the contract but was told she would only receive back $389 because the mobile trader would deduct a large cancellation fee. Mihirangi did not cancel the contract, and then in April 2018 another sales agent from the mobile trader came to Mihirangi’s home and signed her up to a new contract for more goods at $4,150 (and the first contract was cancelled). However, the mobile trader only applied the cancellation fee towards that contract, not the full $1,029.60 Mihirangi had paid under the first contract.
Mihirangi then cancelled the second contract and was charged a further cancellation fee. This resulted in Mihirangi owing the mobile trader money.
Mihirangi’s budget adviser assists
Mihirangi contacted her budget adviser, Margaret, who referred a complaint to FSCL on Mihirangi’s behalf. Margaret told us the mobile trader had not carried out any assessment of whether Mihirangi could afford to enter into the contracts. Mihirangi was a single parent of 8 children, and a beneficiary. It was clear Mihirangi could not afford the goods.
To resolve her complaint, Mihirangi wanted the mobile trader to refund her $1,029.60.
FSCL starts investigating the complaint
The mobile trader’s internal complaints process could not resolve the complaint and we started our investigation.
We asked the mobile trader to outline how it assessed that:
a) Mihirangi could afford to enter into both contracts without suffering substantial hardship (section 5 of the Responsible Lending Code (RLC)).
b) Buying the goods under both contracts was going to meet Mihirangi’s requirements and objectives (section 4 of the RLC).
We also asked the mobile trader to outline the steps its sales agent took to ensure Mihirangi could make an informed decision about entering the contracts, and that she understood the full implications of entering them (section 7 of the RLC).
The mobile trader’s response
About 8 working days later the mobile trader replied saying it had reviewed its file and realised that when it processed Mihirangi’s contracts, it did not check her ability to pay for the goods. Further, the mobile trader said it had identified some gaps in its processes and had implemented new company policies and ongoing training for its sales agents to ensure this did not happen again. The mobile trader said it would refund the full $1,029.60 to Mihirangi.
Mihirangi accepted payment of $1,029.60 to settle her complaint.
Key insight for consumers
It only took 10 working days from the time we started our investigation for the complaint to be resolved. Often, once FSCL gets involved, significant traction can be achieved on disputes which have been ongoing for several months.
It was also very encouraging that the mobile trader was able to identify areas where its policies and practices could be improved, as a result of Mihirangi making her complaint.