Advice for small businesses

11 November 2009 - 14:48
By Wendy Knowler (Consumerwatch)

In almost six years of Consumerwatch, we have never dedicated a show to dealing with issues which affect businesses rather than consumers.

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Consumerwatch 11 November - Advice for businesses

We parted with tradition today by aiming the show at some of our most loyal listeners – small businesses.

They are hit by outright scam artists on a regular basis, plus, like the rest of us, they need to be on high alert for clauses in contracts which are really prejudicial to them.

Let’s start with the outright scams such as the refund one, when the fraudsters make payment for a company’s goods or services, then say, “oops sorry, we overpaid, please refund us”.
The business complies, and then the fraudster’s cheque bounces.

The advice, obviously, is to be extremely wary when someone claims to have overpaid, and to make absolutely sure that the money really is reflecting in your account before agreeing to make any refund.

INK CARTRIDGE TELESALES

And then there’s the company which sends letters out to small businesses, offering to handle the company’s phone book listing – for a rather large fee.

There’s nothing illegal about this company - and there may be more than one of them - but what they don’t say is that Telkom provides this service free of charge, apart from the standard fee for a bold listing.

Then there are several companies whose telesales agents call up small businesses across the country, offering them printer cartridges. The most prominent of these is Jo’burg-based Haltrex Systems, which recently changed its name to Newtech International.

Dozens of people have claimed that they agreed to buy one cartridge, only to have repeat orders delivered and followed by threats of legal action if the business refuses to pay for them.

One of them, Gail Lambert, who manages a protea farm in Howick, told me how she’d received a call last August from Haltrex Systems, offering her printer cartridges.

She agreed to place an order for one colour and one black cartridge, she says.

They were posted to her, she paid, and, as she put it: “I thought that was that”. But five months later, another parcel arrived from Haltrex, containing two colour and two black cartridges.

“I immediately phoned the company to say I did not order these nor did I need them and that I would return the parcel.

“I was firmly told by a man called “Mark” that this was a ‘back order’ and that I couldn’t return the cartridges.”

Lambert posted them back anyway and was then called by “Mark” who told her that she’d been “handed over” for non payment.

When I spoke to Haltrex or NewTech’s owner, Michael Skry last month, he said that he was aware of the “problems” and had put various systems in place to reign in his sales staff.
He said: “Trading is tough and sales are down, so some of them are acting in a stupid way. I have given them a warning.”

There are no binding agreements or contracts, he said.

“We give discounts depending on the size of the order - that’s where the misunderstanding could come in.”

So, small businesses - don’t feel intimidated if you are harassed for payment for goods you didn’t order. Just say no. They have no grounds to take any legal action against you.
Happily, the Consumer Protection Act - which becomes binding on companies about a year from now - has a section that deals with unsolicited goods.

It states, among other things, that if “a supplier delivers any further goods to a consumer, other than in terms of a different agreement or transaction, those further goods are unsolicited goods.

The same applies to the delivery of “a larger quantity of goods than the consumer agreed to buy”.

And the person who has received the unsolicited goods can keep them without paying for them – in other words, consider them a gift - or send them back at the expense of the supplier.
If a consumer pays for unsolicited goods, for whatever reason, they are entitled to a refund from the supplier, plus interest.

So come next August, when the Act becomes binding on companies, such tactics will be very risky business for those who try to get consumers to buy more than they agreed to.

PRINTER/COPIER CONTRACTS

It is not unusual in the printer industry for companies to force their clients to keep paying rental on their printer/copier/faxes for another year if they fail to give notice of cancellation some three months before their fixed contract expires.

To my mind, this is sneaky in the extreme. It expects someone within the business to remember the terms of a contract signed five years earlier. If they don’t remember to cancel three months before expiry, they have to keep on paying for another whole year, for a very old piece of equipment.

Frankly, I can’t believe they’ve got away with this consumer prejudice for so long. The machine is long paid off, and that extra year is pure profit for the company.

Anusha Panchpersadh, finance manager with an architectural practice in Umhlanga, contacted Consumerwatch about a slightly different version of this sneaky lock-in issue.

Her company had taken out two five-year printer contracts with Maynards Office Technology. Both were not producing the quality of prints the practice required, despite the printer company’s repeated attempts to fix the problem.

So they decided to cancel the contracts before the five-year terms were up, and pay for the full five years. But when Technofin, the company handling Maynards’ contracts, sent the settlement balances through, a red flag went up for Anusha.

The settlement values were far higher than the ones she had calculated. So she requested breakdowns, and that's when she discovered that the settlement amounts both included 90-day penalty fees - R2130 in the case of one printer, and more than R5000 in the case of the other.

When she objected, the relevant clause of the five-year-old contract was emailed to her, stating that "after the initial period of hire the agreement shall continue indefinitely until either party gives 90 days written notice of termination. Such notice shall only take effect on expiry of the stated initial period or any anniversary of the date.”

This clause effectively made the contract a 63-month one, rather than a 60-month one, Anusha says. She took exception to the fact that this was not brought to the attention of the company at the time of signing.

When Technofin refused to budge, Anusha contacted Consumerwatch.

We got hold of Technofin director Gayle Croome, who got back to us this week to say that the company had waived those 90-day penalties on both the architects practice’s contracts and sent an instruction to its branches that with immediate effect the 90 day penalty would no longer apply to any of its contracts.
Excellent news!

The Consumer Protection Act covers this scenario as well. The original version of the bill had all contacts becoming null and void on expiry date, but this was watered down in the final Act. All is not lost, however - it will mean that companies won’t be able to get away with being quite so sneaky about the cancellation procedures.

The Act states that between 40 and 80 days before a fixed term contract expires, the company – be it a cellphone company, fitness club or printer rental company - has to notify the consumer of this fact, and spell out their options, including any increases in monthly subscriptions after the fixed term.

Unless the consumer cancels the contract or agrees to its renewal, it will continue on a month-to-month basis.

In short, printer companies will be forced to re-write their contracts to exclude that “if you don’t give notice of cancellation in time, we’ll force you to pay us for another year or 90 days, or whatever” clause.

Technically, the companies don’t have to comply until October next year, but it would be gratifying if they opted to comply with the spirit of the Act by getting rid of the punishing penalties right now, as in this case.