THE Consumer Council of Fiji launched its report on the hire-purchase industry, which claimed there were fraudulent activities, in particular on credit charges within the industry.
Annually, the Doctor Ganesh Chand report estimated that hire-purchase companies managed $25.5m of charges from carrying out a credit business.
The total credit business was $57m per year, which was 95 per cent of the value of the goods sold on hire-purchase annually.
"The Consumer Credit Act requires full disclosure of all costs of credit extended by HP dealers. This research has found that the leading hire-purchase dealers are in breach of the disclosure requirement provisions of the Act.
"Another breach is in the calculation of the credit charges. The law allows a credit charge to be levied, to no specific limit, on the actual outstanding credit, calculated on a daily basis.
"No hire-purchase dealer abides by this; instead they levy a credit charge on the sum that is already repaid.
"To this extent, this is fraudulent conduct. It is estimated that this fraudulent conduct generates at least $13.3m per annum," the report said.
Attorney-General Aiyaz Sayed-Khaiyum said the role of the government was to manage the power differentials. He welcomed the report and said there could be areas that needed to be looked at and that the government would continue to look at loopholes.
The Chand report said there was no regulation on interest rates.
"The Consumer Credit Act provides for the minister responsible for Commerce to prescribe the maximum annual percentage rate of interest for a credit contract (s264(1)).
"So far, however, no such regulation has been published. The market, therefore, has been left to determine this rate. In this respect, the hire purchase dealers are within the law, the concerns of consumers notwithstanding," the report said.
Charles Work from Courts Fiji said the report did not acknowledge the service being provided by hire-purchase dealers who were even assisting those in rural areas purchase goods. Dominon Finance's Karl Smith said the report did not look at the risks taken by the hire-purchase companies or analysed the write offs they had to do.
The research also examined numerous characteristics of the hire-purchase consumers.
It found that about three quarters of the hire-purchase consumers had incomes less than $15,000 per annum, with about 70 per cent of the consumers having joint family incomes of less than $20,000.
At least 18 per cent of these consumers had their own homes while 82 per cent stayed in rented accommodation. In terms of education, 70 per cent of the HP consumers had no post-secondary school education.