New Zealand Law Society - Fines top $1.5 million for mobile traders’ breaches of consumer laws

Fines top $1.5 million for mobile traders’ breaches of consumer laws

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In the biggest fine so far handed down against a mobile trader, Mobile Shop Ltd has been fined $330,000 for breaches of consumer laws. The sentence brings the total fines handed down in 13 Commerce Commission prosecutions of mobile traders to $1.56 million.

Auckland-based Mobile Shop pleaded guilty to 24 charges, 12 under the Fair Trading Act and 12 under the Credit Contracts and Consumer Finance Act. It was also ordered to pay $10,800 in statutory damages to about 50 debtors.

Mobile Shop failed to provide key contract information to borrowers before they signed the contract, failed to ensure contract information was expressed clearly and concisely, and made false or misleading statements about consumers’ rights. The offending covered more than 5,000 contracts entered into between October 2015 and September 2016, with an estimated total value of more than $1 million.

“Of the 13 mobile traders we have prosecuted, Mobile Shop’s contract was the least compliant, and the fine reflects that. We had advised Mobile Shop in 2015 that we did not think that its contract complied with the law, but the company didn’t change its contract,” says Commissioner Anna Rawlings.

“All of Mobile Shop’s contracts lacked basic information such as the number of payments and an accurate statement about cancellation rights. Most sample contracts viewed by the Commission also failed to state the payment amount and when the first payment was due. The wording was confusing and error-ridden and the contracts were in small font making them difficult to read,” she says.

The Commission says that, in sentencing in the Auckland District Court, Judge Patrick Treston said the number of victims was significant and they were “particularly vulnerable”. He noted that winding down of the business is nearly complete.

Mobile Shop is the 13th trader to be sentenced since the release of the Commission’s 2015 Mobile Trader report. The report identified widespread non-compliance with consumer laws by mobile traders. After it was issued the Commission followed up with mobile traders to see if compliance had improved and then took enforcement action including prosecutions in cases of continued non-compliance.

"This is the last prosecution arising from the Commission's follow-up on the original project, but it is not the end our enforcement work. We have a number of investigations open and we will continue to take appropriate enforcement action against traders which fail to meet their legal obligations to their customers,” says Ms Rawlings.

The Mobile Trader report identified 32 mobile trader companies operating across New Zealand.

Since the report, the Commission notes that:

  • All 13 completed cases have ended in convictions;
  • Flexi Buy Ltd owner Vikram Mehta was jailed for two years, the first ever prison sentence in a prosecution initiated by the Commission;
  • Fines totalling nearly $1.6 million have been handed down by the courts;
  • The fine against Mobile Shop was more than twice as high as the next highest fine, of $150,000 against Ace Marketing Ltd in July 2016;
  • Nearly $100,000 in returned fees and damages have been ordered;
  • Customers of one trader (Greenfield Global Ltd trading as KiwiOwn) were refunded nearly $110,000 in credit and default fees following a Commission investigation;
  • One mobile trader has been sent five infringement notices totalling $5,000.