Finance company GE Money will be giving the Federation of Family Budgeting Services a NZ$60k Christmas present this year as part of a settlement with the Commerce Commission over a misleading advert encouraging customers to use a debt consolidation facility on offer.
GE admitted to breaching the Fair Trading Act by inviting customers to take advantage of a loan that it marketed as a money saving move but in reality left people worse off because the repayment period was drawn out over five years. The October 2011 ad was pitched to customers via a direct mail, print and radio advertising campaign including a 110,000 letter fan-out targeted South Auckland neighbourhoods where debt consolidation would be most in demand.
Graham Gill, competition manager for the Commerce Commission, said analysis of the finances of the real life customer used in the print advertisement showed that while monthly payments were initially reduced, they were substantially higher than the original loan repayments for the majority of the 60 month loan period. The advertising stated that customers would be "better off each month" and have "more cash left in your wallet."
Gill said GE Money was unable to supply the Commerce Commission with "acceptable evidence" that customers would be financially better off outside the initial transfer period, adding that consumer protection was paramount.
"Consumers must be able to rely on claims made in advertising, especially on claims about debt products that they might not have a high level of knowledge about."
A complaint about GE Money's debt consolidation campaign was received by both the Commerce Commission and the Financial Markets Authority however the investigation was led by the Commission.
To GE Money's credit, Gill said the company was fully compliant, promptly recognising its wrongdoing and reaching a "satisfactory settlement" which avoided the necessity of a court proceedings. (To see the full settlement details click here).
Under section 11 of the Fair Trading Act, no person shall, in trade, "engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose or quantity of services.''
GE Money's latest financial results for New Zealand show it more than doubled profit after tax to NZ$65.4 million last year from NZ$28.5 million in 2009.
8 Comments
And when the Budgeting Service tries to sort out many individuals financial situation & debts - they cannot find any information about their clients GE personal loans, because GE does not send any statements or updates on their loan balance etc to their customers.
Sure looks that way Rob. The companies seem to regard these fines as just part of the cost of doing business. Vodafone breach the fair trading act continually, get a "slap on the wrist" fine and carry on with their blatant lies. What about the three strikes law, do corporations have differant laws to the rest of us?
I can't say that I'm surprised to read about this. I personally have a credit facility with GE (part of an interest free deal at Harvey Norman) and it 'seems' wilfully designed to entrap unsuspecting punters.
In my case, a 40-month interest free deal (for a relatively expensive item) resulted in a first bill of greater than 1/40th the amount. Figuring that this would keep me ahead of the game, I kept making these payments on time, whenever the bill arrived. They seemed to vary by a dollar or two each month - i figured that it was re-calculating based on the fact that I had overpaid to begin with...
A year or so down the track, I notice that the end of my interest free period is getting closer, but it doesn't seem that my remaining payments are going to cover the outstanding balance. Of course... on closer inspection, the 'bill' that I got each month was just the 3% minimum payment on the outstanding balance.
So, now I'm back to 'over-paying' the bills each month to ensure that the debt is repayed before the Interest Free period ends.
...if I'd set up a direct debit to make the payments, I probably wouldn't have even noticed.
Called entrapment. Magnifying glass required! The cons/greedies in power - only $60K - how many $mil did they take? Try telling this to the "Financial geniuses", & you'll get laughed at. Cons today are rife. Don't expect commiseration. Since 1980's, seen at "full speed". In court don't expect justice. My 97yr old father-in-law was ripped off of over $160,000 but before we got to recovering the money, the person involved passed on & her daughter, who had also been taking his money, inherited. A financial advisor took $80,000 but he's flown the coup. That's what you call justice today!!!!
Look what happened to Mr & Mrs Hubbard, SCF. All Mr Hubbard was doing was trying to save his company. The scorn raged on him is unbelievable. The "greedies" got in. Don't expect honesty & justice.
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