Upsurge in consumer complaints, protection for prepayment consumption, advice on mortgage problems, misleading advertising

...These are some of the issues revealed today at the first of a regular press briefing on the state of consumer complaints

The Consumer Council has recorded rapid increases in consumer complaints in the first four months of this year.

Consumer complaints during the period totalled 5,489 representing a 74% increase over the corresponding period last year. Compared with the immediate preceding four months, the number is up 28%.

The rising trend in consumer complaints has continued since the present economic slowdown in the latter part of last year. A record high 11,535 consumer complaints was lodged with the Council for the whole of 1997. A new record is almost certain to be set for 1998.

These figures were released today (June 3) at the first of a regular press briefing to be held every four months to heighten public awareness of consumer complaints and some of the topical issues and concerns facing consumers.

Speaking at the briefing, the Chairperson of the Consumer Council, Ms. Anna WU, noted that a particular area of concern of the Council in the face of economic downturn is in the area of prepayment goods and services.

Ms. WU stressed the need for consumers when purchasing prepayment goods and services, to carefully balance the benefit of discounts and the risk of not being able to redeem the goods or services.

The Council has received, up to the end of April this year, 1,352 consumer complaints involving prepayment purchases. Of these, 1,200 complaints arose from the Maria Bakery which went into liquidation on April 29. (The closure of Maria Bakery has so far drawn a total of 2,617 complaints involving about 94,700 dozens of cakes worth some $3,550,000.)

The remainders of prepayment-related complaints were from video rental chains (407 cases) largely due to closure of their branches and health and recreation clubs (45 cases) on grounds of non-delivery of promised service.

Protection for Prepayment Consumption

The Consumer Council has long advocated the need for protection to consumers in such prepayment transactions. In this connection, the Council is reviewing the situation again :

• To regain consumer confidence, trades are urged that it is in their own interest to devise new, viable prepayment schemes to enhance credibility of their sales practice.

• The Council has extended requests to different trades engaged in prepayment sales for discussions and will, in the near future, also consult professional bodies and chambers of commerce to explore various means and ways of securing consumer prepayments and deposits.

• The Council will be discussing with the Government again on the need to bring in some sort of market surveillance on prepayment schemes and protection to consumers. Recent events affirms the need for a systemic response to the issue.

Advice on Mortgage Problems

An area of growing consumer concern mortgage problems associated with the purchase of property. It has been widely reported in the media that a problem of particular concern is that of the valuation of their property by the banks in today's depressed property market.

"Consumers should consider carefully what the problem is and what avenues are open to them," said the Council's Chairperson, Ms. Anna WU. "Because circumstances differ so much from person to person, consumers should carefully consider their own financial and legal commitments before deciding the appropriate course of action to take," she added.

Based on the complaints, the Council could see consumers facing any one of the following situations:

First and foremost is that of a consumer who is in the process of applying for a mortgage, has paid a deposit and is now due to make the final payment but finds that the amount they can borrow is insufficient to complete the transaction due to a downward adjustment of the valuation of the property by the banks.

Second is that of a consumer who has paid a downpayment of say 10% and is contracted to pay periodic instalments but not the whole balance while the development is under construction. Because of a fall in the value of the property, the consumer is caught in a dilemma whether or not to go ahead with the purchase, particularly if the whole balance is due soon.

Third is that of a consumer who has completed the purchase of a property but, because the income drops, finds it difficult to maintain payments on the mortgage.

To stabilize the market and provide relief to consumers in hardship, the Consumer Council calls upon developers and banks to work together to see what arrangements may be put in place to assist those who are in genuine difficulty.

In this connection, the Council is aware that already some developers are helping consumers with a second mortgage as a 'top-up'. The interest rates and repayment periods for the second mortgage may differ with each development.

Consumers could also contact their banks for negotiations to secure additional finance. For those consumers facing genuine financial hardship in mortgage repayment, they could negotiate with the banks to reschedule the repayment package.

With regard to the recent Government package on the property market, the Council will keep in view how the market settles and monitor the impact. But the removal of restriction does mean that flat buyers may now put the property on the market for presale before completion.

During the period (January - April) under review, the Council received a total of 580 property-related complaints, representing a 189% increase over the corresponding period last year. Of these only 4 cases were related to mortgage problems. But there were 12 such cases in May.

Misleading Advertising

Another long standing concern of the Council is the lack of effective regulation over misleading advertising. Many a consumer complaint has probably stemmed from misleading advertisements or claims.

Ms. WU observed that existing law dealing with misrepresentation is inadequate for consumer protection purposes as it requires an infliction of damage which should be avoided in the first place.

She cited two recent cases in point brought to the attention of the Council for assistance:

• One concerned an advertisement offering what appeared to be real bargain rates for telecom services to various destinations. But what actually transpired was that only one of the prices advertised was applicable. Further, it was subject to certain conditions such as the validity period for the bargain and the definition of non-peak hours.

• The other was about a sales promotion by an electrical appliance shop. It advertised a Guaranteed Low Price for its goods with promise of refund of the price difference if it is not the case. Again the guarantee and refund promise were applicable only subject to a string of terms and conditions. For example, only the price specified by a department store or electrical appliance company with over 7 branches could be used for comparison and refund in respect of the price difference could only be made before 9:00p.m. on the same day of the purchase.

Said Ms. WU: "In both cases, the advertising was cleverly designed in such a way that - if you are not careful in reading the small print -  you could be misled and suffer the consequences."

"The advertisements in question may or may not be a case of misrepresentation. That is a matter for the court to rule. But there is little doubt, in my mind, that they are clearly misleading to many consumers. That is what we want to see regulated by the law," she asserted.

Consumers should, therefore, stay wary of dubious advertising claims. The Council has launched a study of the problem. It is currently engaged in data collection for suspected cases of misleading advertisements and is conducting research on what constitutes misleading advertising and schemes of control or legislation existing in other countries.

Other significant increases in consumer complaints recorded between January and April this year and compared with the corresponding period last year:

There were, on the other hand, some notable decreases :