Chrisco, which has been criticised for targeting vulnerable customers and overcharging for goods, was fined $175,000 yesterday for misleading and people over their rights to cancellation and charging fees of up to $800.
The Commerce Commission said between 2008 and 2010, Chrisco (which supplies Christmas food hampers and other products on layby) operated a policy where customers were charged 20 percent of payments already made if they cancelled up to 90 days prior to the final payment date. If they cancelled within 90 days of the final payment date, that fee was increased to 50 percent of payments already made.
The Layby Sales Act gives customers the right to cancel at any time until the last payment and governs what a seller can charge a customer when they cancel.
Following an investigation by the commission, Chrisco pleaded guilty to 10 charges under the Fair Trading Act in the Manukau District Court. The breaches related to customers being misled about what they could be charged if they cancelled at a particular time, how they could cancel, and in some instances, at what point in time they could cancel.
“Chrisco’s cancellation policy meant that the company recovered more than it should have under the Layby Sales Act, so customers were overcharged. As the fee was worked out as a percentage of payments already made, some customers ended up being charged hundreds of dollars. In a few cases the fee was as much as $800,” said Graham Gill, the commission's competition manager.
As a result of the Commission’s investigation, Chrisco reviewed and amended its cancellation policy to be 20 percent of payments made with a cap of $250. It also retrospectively refunded approximately 750 customers a total of $141,735 using the amended cancellation policy.
Chrisco also pleaded guilty to charges relating to its toys and gifts catalogue and its ‘Headstart Plan’. The toys and gifts catalogue stated that customers could not cancel their contract after a certain date, breaching the Layby Sales Act which allows cancellation at any time up to the last payment.
Chrisco’s ‘Headstart plan’ automatically enrols customers into a new Chrisco plan when they have finished making payments for their previous plan, unless the customer ticks a box to opt out of the scheme. Chrisco marketed the plan as fully refundable up to the time an order was actually made. However, it wasn’t clear to customers that if they didn’t make their order by a certain time, Chrisco would choose a plan for them. Once that happened, cancellation fees would apply.