The Consumer Council announced a new focus aimed specifically at assisting consumers in the current economic downturn

The Consumer Council today (October 30) announced a new focus aimed specifically at assisting consumers in the current economic downturn.

The multi-facet plan will pull in the resources of the Council to focus on a number of areas vital to ensure that consumers will secure value for their hard-earned money, access to advice on consumer credit, and enhance their confidence in trade practices.

In the first nine months of this year, the Council has received a total of 15,483 consumer complaints, representing an 8% increase over the corresponding period last year.

Scam Alert

First, the Consumer Council is on the vigilance of get-rich-quick scams such as certain binary marketing schemes and modelling jobs, which consumers and job seekers are particularly vulnerable at a time of financial hardship.

To effectively protect consumers from such rip-offs, the Council is in close co-operation with the Police.

Binary Marketing Schemes

Complaints related to direct marketing sales remained high at 95 cases in the first nine months of this year compared with 136 in 2000. Of particular concern is certain binary marketing schemes somewhat similar to pyramid selling which is prohibited under the law.

Such schemes stipulate that one member would recruit two members (who form the first layer of recruitment), and so two become 4 (the second layer), and the process goes on until it reaches 21 layers. A staggering total of 4 million members, or 2/3 of Hong Kong's population would have been recruited!

The participants are normally required to pay a hugh sum of money to buy their first batch of products. When they re-sell to the second liners, they are rewarded either by cash rebate, product redemption points or up-graded membership status.

As the goods being sold are either very expensive or not commonly used items, consumers usually have to turn to their friends and relatives for recruitment of new members. In their eagerness to recruit, many may even make misrepresentations on the products.

But the companies concerned would deny any responsibility as, according to these companies, members are not their staff and that members have been instructed not to make such claims.

When approached to join direct marketing scheme, consumers are reminded to heed the following:

• Avoid any investment scheme that provides commissions for recruiting additional distributors rather than through sales of products. It may be an illegal pyramid scheme.
• Beware of schemes that ask you to purchase expensive inventory, and schemes that promise enormous earnings. These may be thinly-disguised pyramids.
• Don't pay or sign any contracts in a high-pressure situation. Insist on taking your time to think over a decision to join. Don't be embarrassed to turn down your friend's invitation.
• Importantly, if the claims about the scheme and your potential earnings seem too good to be true, they most likely are.

Modelling Agencies

Consumer complaints related to modelling agencies have indicated a rising trend after a drop last year. 43 cases were reported for the first nine months of this year compared with 51 for the whole of 2000.

Consumers are reminded to be always on the alert of agencies that demand payment of substantial sums of fees on the pretext of training or whatever propose before any modelling job is offered. This is generally applicable to any potential job offer.

Recent cases have revealed that some of the modelling agencies have changed their tactic in that they no longer require participants to pay directly to them. Instead, consumers are asked to pay for beauty treatment or shape-up courses specifically designated by the agencies.

Bona-fide agencies will not ask for any fee before any job offer.

Time-share Schemes

Also causing concern are the marketing tactics of certain time-share schemes which require prepayment of substantial sum of money. A dramatic increase of 128% was recorded during the first nine months of this year. There were 114 cases compared with 50 for the corresponding period last year.

Unwary consumers are usually lured to such companies by the offer of attractive prizes of holiday trips abroad. But once they are in the company offices, they are subjected to aggressive marketing tactics that include several salesmen pressurizing one single customer; and non-stop bombardment of sales talks until late into the night. Often consumers found it difficult to leave until and unless they agree to subscribe.

When confronted with such a situation, consumers should bear in mind the following:

• They have every right to leave the sales office, and to call the police should they feel they are being unlawfully detained.
• They should be clearly aware of the large sums of money (tens of thousands of dollars) involved in time-share schemes, with commitment to pay over several years.
• They should ascertain all facts relating to the time-share, transportation costs, facilities available etc. and most importantly they should ask themselves whether their family members would be interested in spending their holidays at the same destination year on year.
• It may be difficult to rescind the contracts once signed.

Consumer Credit

Second, the Council will seek to provide more information on consumer credit catering to their particular financial circumstances.

Consumer dissatisfaction in some credit card services has grown with 372 complaints in the first nine months of this year compared with 314 in the same period last year.

The majority of the cases were disputes over the interest charged by the credit card providers and the fees charged by collection agencies.

It is crucially important for consumers to be fully aware of the pros and cons of various alternatives of credit and financing to avoid the consequences of getting into serious debt.

For instance, consumers should be aware that using multiple credit cards as a means of obtaining long-term loans or personal loans could be extremely expensive because of the high interest rates adopted for such credit.

They should also be aware of the substantial collection fees in the event of payment default which could be exorbitant and unproportional particularly in relation to a relative small outstanding amount for credit card or other unsecured personal loan facilities.

Information and advice on financial products for the consumers will be made regularly available through the Council's publications, including its monthly CHOICE, and consumer education activities targeted at different sectors of the community.

An exhibition to mark the 25th Anniversary of the publication of CHOICE will also feature this aspect of the Council's work. It will be held from November 15 to 18 at the New Town Plaza in Shatin.

Enhancing Consumers' Confidence

Third, the Consumer Council has been, and will continue to be in discussion with the business community to adopt practices which will be beneficial to the interests of consumers and boost consumers' confidence in a depressive market environment.

For example, the Council has contributed its views to the making of codes of practices for telecom operators and in the banking industry.

In telecommunications, the Council, in conjunction with OFTA, has prepared a Code of Practice for Mobile Phone Operators that requires operators to (amongst other matters):

• provide a copy of the contract in the language (i.e. Chinese or English) chosen by the consumer;
• clearly identify in a prominent place the salient points of the contract using particular font sizes, and color combinations to enable easy reading;
• that adequate notice be given before changing the terms and conditions of general service contracts; and
• limiting the ability to change the terms and conditions of fixed term contracts.

With regard to the Code of Banking Practice, HKMA and industry have accepted the Council's position on a number of matters relating to credit card contracts, including:

• requirements regarding font size, legibility of print, highlighting of salient features of terms and conditions, and choice of language;
• that terms and conditions should be provided at the request of consumers;
• that banks should quote the Annualised Percentage Rate to make comparisons of interest rates easier;
• at the request of debtors, that banks should provide a detailed breakdown of the costs and expenses for which debtors are required to indemnify banks;

The Council has a statutory role in encouraging industry and professional associations to establish codes of practice to regulate the activities of their members. This is an ongoing task that evolves over time, in keeping with the needs of consumers, and the obligations expected of the business community.

Complaint Statistics For the Year 1999 to 2001

Top Ten Complaints of Year 2001