Greene, Edward L.

English

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BETTER BUSINESS BUREAU ACTIVITIES IN AIDOF THE TIME PURCHASEREDWARD L. GREENE*Consumer complaints made to Better Business Bureau executives against dealerswho sell on time payments are the result of various causes. The most common com-plaints are against dealer deception-sometimes downright trickery. Occasionally itis impossible to show that the law has been violated, yet nevertheless, from ourexperience, we know that some dealers have set out deliberately to trap their cus-tomers. Thus enmeshed in legal contractual relationships, the victims must haveassistance to avoid serious losses. Unfortunately, they are frequently dependent uponthe questionable leniency of ruthless schemers which is, to say the least, forcing theminto accepting hard bargains.Of course, there are some participants of time payment purchases who find them-selves in trouble because of their over-reaching their ability to meet instalments asthey come due. Some complainants are welshers who attempt to obtain the servicesof the Bureaus to pull their chestnuts out of the fire.It is well to bear in mind, moreover, that in any discussion of the practices involvedin time payment sales plans there are countless instalment sales that are mutuallysatisfactory to buyers and sellers. We are without the facilities to make a carefulsurvey of unfair time payment practices which affect the consumer, but from whatwe have learned from consumer complaints we believe that there is ample need forgreater consumer protection.Generally speaking, Bureau executives report that most of the complaints theyreceive involve the automobile, automobile accessory, furniture, radio and jewelrybusinesses. While there is no doubt that unfair transactions occur in the sale of newautomobiles, it seems to us that practices in the sale of used cars are more serious.Complaints indicate that many people do not understand that there is no standardfinancing charge. Where buyers have questioned the interest charges, the salesmenare known to have replied that they are the usual nominal charges. Later, the buyerdiscovers that they are excessive. Some used car buyers are induced to sign timepayment papers in blank. Of course, this carelessness leaves them wide open for any* A.B., x9o8, University of Pennsylvania. General Manager, National Better Business Bureau, since1925. Previously General Manager, Boston and Cleveland Better Business Bureaus. Author of numerousarticles on unfair trade practices.BEnTaR BUSINEss BuREAU AcnvnEschicanery that unscrupulous dealers can devise. In some instances used car dealersadvertise "No Down Payment" but require chattel mortgages on furniture beforeconsummating sales.One Bureau executive reports: "Our primary complaints in this field have beenagainst automobile accessory and radio dealers taking liens on cars and then attachingthem. One case which is not typical, but which illustrates the practice, was of acolored boy who owed $2.00 on a tire for his car. His car was attached and he wasforced to pay a $15 repossessing fee, the balance on the tire and a $2.00 storage fed forhis car."Another Bureau executive reports: "Some cases have come to our attentionwherein the buyers were quoted a definite price as a financing cost only to find uponcompletion of the sale that the total financing charge was sometimes two or threetimes as much as what had been represented to them. When the purchasers learnedof these discrepancies and refused to make further payments, the financing companiesthen went through the regular procedure of repossessing. The most unfortunatepart of some of these cases has been that the purchasers had signed conditional billsof sale before the terms were written into their contracts. One dealer had a furtherhold on his victims even if his prospects did not go through with the conditional billof sale. Many complainants alleged that when they had old cars and called at thedealer's place of business to try out the cars they were contemplating purchasing, theywere asked to leave their old cars while they tried the dealer's. At the same time,they were asked to sign a paper which was represented to be a receipt to show theywere trying out the dealer's cars but which actually turned out to be releases on theirown cars. During the period they were testing the dealer's cars their own cars wereremoved, and when they complained the dealer pointed out to them that they hadsigned releases on their cars and in some cases had actually signed orders to purchasecars using their old cars as down payments."We have a report on a tire company that makes short-term contracts and renewsthem for a fee. Some people have complained that after several years of paying ontheir contracts they still owe more than the original purchase price.We are advised that furniture dealers are exercising a more careful check-upbefore they will sell on time payment plans. The reason for this care is due to lossesresulting from repossessing. However, when credit has been established some fur-niture dealers are not above trying sharp practices. A case in point is of a buyer whocontracted to pay $iooo for some furniture. When the amount due was paid thedealer induced the customer to buy a $ioo radio. Before the radio was paid for thebuyer lost his position and was unable to continue the instalments. The buyerclaimed that, unknown to him, the purchase of the radio was placed in the sameaccount as his paid up furniture, and for failing to meet instalments on his radio, hewas threatened with a loss of his household furniture as well as his radio.Interest charges sometimes amount to much more than is claimed by the dealer.256 LAw AND CONTEMPORARY PROBLEMSA case reported involved the purchase of a piano for which the buyer contracted topay $545. He was told that an interest charge of 6 per cent would be made. Butwhen he started paying the "accommodation" charge, it was for $2.48 a month untilhe completed his contract. He paid this charge of $2.48 a month for three years,sometimes missing a payment on the principal but always paying the carrying charge.At the time the case was reported, the customer had been paying on his contract forthree years and had reduced the principal to $71. But, of course, the $2.4 8 a monthfinancing charge continued.Instalment houses as a general rule advertise "Easy Credit Terms." Many pros-pective customers are-induced to make down payments before their credit is estab-lished. Unscrupulous dealers who so advertise and who subsequently refuse to extendcredit have been known also to refuse to refund the down payments. Instead, theyinsist that the down payments be traded in on cash purchases. Victims of this schemeare forced to buy something that they can get along without and what they do obtainfor their money is in most instances excessively priced. In one such case the pro-prietor of the store was prosecuted on the charge of larceny by trick.In states where employees are not protected against the abuses applicable to assign-ing their wages, they are likely to be exploited.The wage assignment made for goods has, in the past, been used in a proper man-ner by a number of concerns. Unfortunately, it has also been used by a type of dealerrelying upon high-pressure selling methods and questionable practices to extract the"last dollar possible" from a customer. These assignments are usually made in haste,the purchasers frequently believing that they are merely signing for the delivery of thegoods. They may not know the seriousness, nor appreciate the importance, of anassignment of future wages. They are often signed by persons misled by verbal state-ments of the salesman which are not included in the printed agreement; and theagreement is frequently printed in such small type as to require a magnifying glassto read it, and to understand the complicated phrasing would require a "Philadelphialawyer." Then the assignment is kept in escrow until its use is needed for collectionpurposes. In any case, where dispute arises in regard to the goods delivered by thedealer, the purchaser is practically helpless. He must meekly submit to unjust treat-ment, or face the possibility of his employer being called upon to pay on the wageassignment.Whenever notices of an assignment are served, many employers have promptlydischarged the employees without investigating the circumstances connected withthe cases. They resent being compelled, without their knowledge and consent, to paya third party one-quarter of an employee's weekly wages. The system also involvedconsiderable expense for the employer. The assignment ran against "any person bywhom I am now employed or may be employed." It required no acceptance by theemployer; he had no discretion and was obliged to pay. To avoid the duty of beinga compulsory bill collector, he often dismissed the employee or told him to pay theBETTER BusINEss BUREAU AcyrrvirEsdealer direct. Thus the employee had little chance of successfully resisting unjustdemands by the holder of an assignment.There are a number of cases on record with the Better Business Bureaus wherecustomers signed wage assignments in connection with a purchase of furniture, etc.,on the partial payment plan. In these cases of complaint, it is set forth that theyfailed to secure the furniture which they purchased, but that cheaper and inferiormerchandise was substituted. When they refused to complete their payments, andmade complaints, they were threatened with wage assignments unless paymentswere made in accordance with the terms agreed upon. Many employees, fearful ofthe attitude of their employers, have, in this way, been victimized by unscrupulousdealers.The person who received the assignment knew its value. It was not only goodsecurity, but was a club over the head of the man who gave it. Employees submittedto unreasonable terms, to unfair treatment, and to additional costs, because of theirfear of the attitude of their employer if a notice of the wage assignment was servedon him. Consequently, a family in such a predicament paid excessive and exorbitantcharges for credit out of all reason to the actual cost of this service.The unfair use of the wage assignment is confined to a group of unscrupulousdealers who have continued in business by abusing the confidence of the public,chiefly workers of small means. The financial condition of the people involved, andthe attitude of some large employers, indicate that the remedy did not lie in anycourt procedure. In fact, the damage was caused before an attorney could beemployed or court action commenced.While no doubt there are reliable dealers who include an assignment of wagesin their instalment sales contracts, the use of such contracts by scheming dealers oftenleads to misfortune and great grief to their victims. The wage assignment alsoreduces the necessity of credit checking when the prospective buyer is employed in aposition that indicates regular employment. Consequently, most of the unscrupulousdealers direct their claims and efforts to this class of wage-earner.There have been many schemes devised to sell jewelry. One of the most viciousreported to us was practiced by salesmen who induced small salaried employees, whileat their places of employment, to take cheap jewelry home for "examination." Thesalesmen stated that if it was not satisfactory they would return the following weekand take it back. They required the recipients, however, to sign "receipts," whichwere in fact bills of sale, and wage assignments to be served on their employers inthe event of failure to pay. The salesmen never returned and no effort was madeto collect directly from the buyers. In due course, the wage assignments would beserved on the employers.When customer complaints involving time payments are brought to the attentionof Bureau executives, they proceed to investigate all the circumstances leading up tothe complaints. The Bureau manager acts as a neutral third party mediating the258 LAW AND CONTEMPORARY PROBLEMSdifficulty so as to try to protect the interest of the other two. When this procedureis not successful and the Bureau manager believes the customer's complaint is justified,he may refer the customer to the Legal Aid Society or to some law-enforcing body,whichever, in his judgment, will prove more helpful.It is, of course, customary for Bureau executives to keep records of complaintsbrought to their attention. This practice will usually provide the evidence to pointout unscrupulous dealers. The accumulated evidence thus obtained will be presentedto a law-enforcing body. It is also the practice of many Bureau managers to issuepublicity prepared to reach the public vhich names unfair dealers and outlines thepractices which are detrimental to public interest.The Better Business Bureaus, of course, are amenable to the law and consequentlymust act in accordance with the law. But there are numerous occasions when adjust-ments are obtained by Bureau executives for parties to complaints that are the resultof misunderstandings. Complaints cleared up by this procedure are helpful both tothe public and honest dealers.Bureau executives examine complaints from the customer viewpoint because it'isobvious that if a dealer deceives the public he is likewise using unfair competition.Unfair competition might be difficult to prove in some cases of fraud, but in busi-nesses where time payments are used, this difficulty is not a factor.The interpretation of the Retail Code which requires that advertising offeringtime payment sales plans must also include a notice of financing costs when they arecharged,1 has proved very helpful in eliminating complaints in those communitieswhere the Retail Code is enforced.This tends to demonstrate that, if the public is put on notice that financingcharges must be paid if purchases are to be made on time payment plans, customerswill enter into such transactions with a better understanding of their responsibilitiesand exercise a greater degree of self-protection, and make better credit risks for thosewith whom they do business.Bureau publicity is distributed in bulletins, newspaper releases and radio broad-casts. The publicity urges consumers who believe they have been cheated to reporttheir experience to the Bureau. In communities where this program is actively car-ried out, unscrupulous dealers become known and in many instances have beenforced to change their tactics. Overloading charges, however, may not be discoveredif they are adroitly sold, and doubtless there are many unfair and deceptive sales thatare made that Bureau managers never hear about.1 The Code of Fair Competition for the Retail Trade provides: "No retailer- shall use advertising ...which . . . misrepresents . . .credit terms." Art. IX, §x (a). The following official interpretation ofthe application of this provision to the advertising of time payment plans was issued June 26, 1934. "Itshall be an unfair trade practice, under Article IX, Section i (a) of the Code for a retailer to advertise oroffer for sale any merchandise with a statement or representation that the merchandise may be purchasedon any deferred payment plan, of whatever nature, without charge for such deferred payment, interest,services, privilege, or other comparable designation, when in fact discounts from quoted or markedprices are given on identical goods sold for cash or when differentials between prices for cash and pricesfcr installment payment are quoted, marked, or made available for identical merchandise, at any timeduring the period in which such merchandise is on sale or offered for sale." N. R. C. A. Rev. BulletinTP-7.

Better Business Bureau Activities in Aid of the Time Purchaser

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Better Business Bureau Activities in Aid of the Time Purchaser

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