Consumers Caught In ‘Never-Never’ Trap
By Azlan Othman

Bandar Seri Begawan - It is more convenient, safe and economical for consumers to depend on regular banks than get into deep unredeemable debt when buying goods on the never-never or the so called hire-purchase schemes offered by all and sundry these days.

An executive, who wished not to be named, said some Bruneians prefer to use bank loan facility rather than the weekly or monthly instalment plans offered by some electrical shops.

This is because banks in Brunei offer reasonable schemes for the public and it is quite easy. He also said that banks should also relax the conditions by extending such service to lower - income earners in the private sectors.

Referringto installment plans offered by individual shops, he said that there should not be a reason for them to utilise such plan when buying, for instance, mobile phones.

However, certain conditions apply whereby banks will reject the application. For instance, if the customer has an outstanding loan which takes about 60% of his monthly salary. On the other hand, if a shop tries to deal unfairly, legal action can be taken, sources said. However, customers need to choose wisely.

Meanwhile, shops that offer instalment plans too take the risks. There have been instances when errant customers have defaulted on payments or just take the goods and disappear without paying their dues.

The source was responding to Bulletin's inquiry on the situation in Malaysia where certain consumers are unaware of the hidden exorbitant interest rates charged when paying goods bought on credit.

What the customer only knows is that he or she pays a small sum weekly or monthly to own it.

Malaysia's Utusan Konsumer, Consumers Association of Penang magazine last week quoted a professor at a Malaysian university as saying that "consumers pay at least 30% more when purchasing a piece of furniture or electrical appliance through credit."

For items like computers, cameras and camcorders, the annual percentage rate (APR) could be as high as 60% per annum. The APR measures the effective or true rate of interest. The report cited a digital video as an example. "The cash price is RM 1,199 but if bought on credit, the consumer can choose to pay for it on weekly or monthly basis. If he chooses to pay monthly, he pays RM82.98 per month or $1,991.60 for 24 months.

"Though the interest he is paying is not revealed to him, he is effectively paying an interest rate of 60.36% per annum."

The report also said that even in cases where the interest rate is quoted, the consumer still has to be careful. This is because the quoted interest rate can be misleading. -- Courtesy of Borneo Bulletin

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