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Understanding your rights when accessing credit
Consumer Council of Fiji chief executive officer Premila Kumar.
Source: CONSUMER COUNCIL OF FIJI
Did you ever regret having bought a car, washing machine or furniture on credit or having taken a home loan which is going out of your hands?
Well, many consumers go through this woeful feeling every day, dying every minute of their life, not knowing what to do next to save themselves from the clutches of their creditors.
With extreme financial burden to meet the bread and butter issues on a daily basis, coping with such credit deals, be it a washing machine from any hire purchase company or a loan from any bank-is never easy.
Managing financial obligations to make your payments on time and maintaining the high interest rates is certainly a big struggle.
Getting into credit deals is easy but repaying is the tough bit.
It is simply being caught between the deep blue sea and the devil – that is, if you don’t get into a credit deal then you cannot buy or enjoy what you want at that particular time and if you get into a credit deal then you have to repay and carry a financial burden.
There is no easy way out and this is the very reason why consumers need to play their cards right.
Consumers need to be smart, wise and make informed decisions each time they get into such credit deals.
This means they need to know their rights that are available to them under the law.
But how many of you know that you as a consumer have legal rights?
Yes, you are protected under the Consumer Credit Act. You need to know your rights first in order to exercise it. The Consumer Credit Act is the main piece of legislation that governs how credit providers must treat consumers.
It is your right, for instance, to have pre contractual disclosures where lender provides certain information to the borrower ‘in good time’ before they enter into a credit agreement.
Consumers have a whole package of legal rights.
And these rights are available to Consumers under the Consumer Credit Act 1999 and Regulation 2009. The Act was amended in 2006.
What is the Consumer
Credit Act?
The Act is a legal safeguard for the consumers. It provides legal framework for the provision of credit to ensure consumers are protected and allowed to make informed decision before entering into a credit contract for goods or services.
It sets down minimum compliance requirements when credit contracts and other information are drafted to fully disclose the terms and conditions and other pertinent information.
It basically motivates the consumers to protect their own interests.
Why the need for the Act?
The Acts and Regulation provide for rights and responsibilities of both the consumers as well as credit providers such as hire purchase companies, banks and other financial institutions. It sets a guideline which lenders and borrowers have to adhere to under the law.
Yes, the credit providers such as the hire purchase companies also have a say and have rights under the Act. Both parties equally have rights and responsibilities. Traders and other financial institutions such as banks are also protected under the Consumer Credit Act.
Sadly, consumers still get exploited because they are unaware of their legal rights and remedies available to them. Hence it becomes extremely important for consumers to be aware of the Act’s existence.
Examples of loans or credit this Act would apply are:
n Car Loans;
n Personal Loans;
n Home Loans;
n Consumer Leases (e.g. car leases and rental contracts for goods); and
n Credit Cards
Act is applicable to:
Sale of goods and services on credit with intent to own the goods by paying in instalments, for example:
n Mortgage under credit contract or related guarantee [for e.g home loan]
n Guarantees and Guarantor;
n Hire Purchase;
n Linked Credit; Providers (related sale contracts where the goods provider and the financier are two different entities)
n Credit Related; Insurance Contracts
n Consumer Leases; [contract terms] and
n Advertising and Related Conduct;
The Act is not applicable to:
n Investments which are not domestic, personnel or for household purposes [for example buying a blender for your coffee shop];
n Commercial activities;
n Investments and promissory notes [written contracts];
n Employer giving credit to employee (Staff loans); and
n Insurer who provided credit against life insurance policy and it does not exceed surrender value of the policy.
Examples of loans that the Act would not apply are:
n Short-term loans (under 2 months) or contract up to 62 days;
n Insurance premiums paid by installments [under 2months];
n Business leases;
n Business loans; and
n Credit provided by pawn brokers
Imbalance of power
In some instances, this legislation expressly gives the lenders a leeway to exploit the consumers. One eyebrow-raising example is the
Acceleration clause in the Act which is applied to home loans and which gives extreme powers to the financial institution to repossess the property in just 30 days of non-payment of loan.
The default notice issued by the lenders do not offer what financial institutions can do for you if you are facing problems.
Some credit providers have always used credit to their advantage.
There is certainly an imbalance in power between the borrowers and the lenders.
Prior to the Consumer Credit Act 1999, there was no such legal protection for the consumers – credit transactions occurred mainly by contractual agreements prepared by the credit-providers and borrowers had no option but to accept the terms and conditions imposed by the credit providers.
With this Act in place, it attempts to remedy this imbalance in power of the two parties.
The Council is exploring avenues to bring about balance and fairness in the whole system.
The Act is applicable to second-hand goods
The Consumer Credit Act works equally in favour of second hand goods as well as for all parties who enter into credit contracts, be it hire purchase agreements, loan and mortgage documents, guarantees and bill of sale, which are legally binding documents.
Issues such as interest rates, mortgages and insurance cover, default payments, notice of repossession and putting up a property for sale after repossession – are also included in the Act.
As stipulated under this piece of law, you as a consumer have a right to ask the hire purchase company to explain to you what parts of the washing machine you are buying, is covered under warranty; if you take an extended warranty, the law demands you to question on how this arrangement of extended warranty works.
Consumers should be aware that there are certain hidden interests and charges and you must ask for full disclosure.
One good example is call cost by hire purchase companies when there is a default in payment – they call your home to remind you of the payment – Do you know that you pay for that telephone cost?
If you are taking a loan and buying a first or second hand car, you have a legal right to ask for pre disclosure on interest rate that will befall your way, also you must take the copy of your insurance cover.
The law extends to the point that consumers who feel they are at the brink of total loss – for instance, who are cash-stricken and are unable to meet their payments can apply hardship clause or unjust transaction, as stipulated under the Consumer Credit Act and negotiate and restructure their payments with the financial institutions, banks or hire purchase companies.
Consumer’s obligation
n The Act also presses on consumer’s obligation to pay on time but above everything, read the contract before entering into credit. They have to be vigilant.
n It is a reality that most consumers just don’t “read the credit contract” before signing it; they treat the document as “standard” and get on with it without analysing it.
n As a matter of fact, consumers have to be more careful because the credit providers or service providers they enter into contract with, most times are well-resourced with superior expertise.
n This Act clearly expects the consumers to “ask” for full information before they make a commitment to pay. And the law also demands the creditors to provide pre-contractual disclosure to enable consumers to make informed decisions.pre disclose.
The Act lays rights and responsibilities in place for the consumers and the credit providers.
Some key areas which the Act covers include:
n Need to have written contracts;
n Pre – contractual disclosures;
n Consumers must have access to copy of all documents that make up the credit transaction;
n Debtors’ right to terminate contract;
n Consumers to get statements from the financial institutions on time;
n Issues relating to mortgage;
n Default interests;
n Guarantor’s rights;
n Default notices;
n Issue of repossession of goods under hire purchase or a house under home loan; and
n Issue of warranty
Council’s role
The Consumer Council of Fiji is presently holding workshops/seminars and campaigns to educate the vulnerable consumers on their rights and responsibilities under the Act.
Council is targeting the people on the ground through community visits, school visits, media campaigns and holding talks with financial institutions to create awareness on the Act.
Consumer Credit Act remains the Council’s key focus.
The Council now provides free debt management and credit advisory services to the consumers who require advice. This is just one of the many initiatives of the organisation to educate the public on how their rights are protected as consumers.
A random check on the ground shows that more work needs to be done to inform consumers about the existence of such a law.
People are unaware that there is a Consumer Credit Act in place.
The majority interviewed on the streets of Suva, simply were aloof about such a law. They were amazed when they were told that they have a right to ask for pre-contractual disclosures; they did not know much about how warranty works, let alone, being aware about the hidden charges and fees charged by the creditors.
The majority questioned were unaware that they have a protection clause in the Act, which allows them to request their financial institutions to restructure their repayments in times when they are facing hardships.
The council has encountered several situations and complaints that clearly depict the vulnerable state of consumers. Below are some feedbacks from the consumers.
“Most times, we consumers are hoodwinked by the traders just because we don’t know our rights and sometimes we are just lazy or shy to ask for more information,” said Ramesh Lal of Nausori.
“But, generally, we consumers are just so complacent. We take the words of the credit providers as so special that we end up signing contracts without reading the document.”
Lal, who is paying a $82,000 home loan says he had no idea about restructuring his loan repayment.
“I don’t know anything about hardship clause,” he said.
Mrs Linda Koroi of Lami said she bought her TV set from a hire purchase company, paid for the extended warranty but has no understanding how she can use the extended warranty cover.
“These hire purchase companies don’t explain us anything. All they do is rush us to sign the documents. I don’t know what pre contractual disclosure means,” she said
“We need consumer protection laws. I thank the consumer council to inform us about such a law. They are our watch-dog,”.
Ms Koroi said she had no knowledge that after the item she purchased has been repossessed by the hire purchase company, she can pay for the default and have it back.
“My understanding is once a hire purchase item is repossessed, that’s it,” she said. “I need to get a copy of the Act and read it.”
Consumers, certainly, need to make it their business to educate themselves on the Consumer Credit Act. Knowing your rights puts you in a far better and confident position when purchasing items on credit. More importantly it saves you from being duped by creditors.
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