A RETAILER of household goods says the returns from sale of goods must allow for recovery costs.
Courts Fiji Limited said the enormity of its customer base — 56,000 customers and 76,000 accounts — put recovery costs in terms of manning and collections costs at a higher level.
"Our returns need to allow for these costs. The report makes no mention of this important aspect," Courts director marketing Anil Senewiratne said.
Responding to the Consumer Council of Fiji's report on the $60 million hire-purchase industry, he said repossession of goods was not a lucrative business.
"Nothing can be further from the truth than this. Repossession is a measure of last resort as both parties lose out," Mr Senewiratne said.
The Rule of 78 — which calculates interest charges on a hire-purchase transaction for the repayment period — was misunderstood, he said.
The council and the Reserve Bank of Fiji had earlier called for the abolishment of the Rule of 78 primarily because it was confusing and difficult to understand.
But Mr Senewiratne said the rule, which was prescribed in the Consumer Credit Act, was an internal book keeping mechanism for recognising income on a hire-purchase contract.
He said the rule was well accepted internationally.
"We demonstrated this in our submission to the council by attaching a spreadsheet working, which shows there is hardly any difference between the Rule of 78 and the reducing balance method, both in the case of income recognition and calculation of interest rebates on early settlement of contracts," Mr Senewiratne said.