Hire purchase (HP) deals are not as easy to get as people think, the Retailers' Association said today.
Chief executive John Albertson was responding to concerns that people are signing up in droves for tempting HP offers, then failing to pay essential household bills like power, phone and food.
Federation of Family
Budgeting Services president Shirley Woodrow said today people were getting themselves into crippling debt with increasing speed, partly due to easy credit and HP deals on luxury items such as DVDs and cars.
A survey of the federation's clients showed clients this year owed $4000 in overdue bills -- a 34 per cent increase on last year.
Mr Albertson said many major retailers and financial institutions rejected a significant number of HP applicants -- around 20-30 per cent.
"You can't just walk off the street and get a hire purchase deal," Mr Albertson said.
"Nobody is going to grab a sale without assurance they are going to be repaid -- it's all about risk."
Mr Albertson said the profit on a $500 item, for example, was not going to be huge for retailers so they looked closely at who they accepted for HP.
"Of course some retailers who target a key market and attract a certain type of customer accept 100 per cent of applicants, because the repayment risk is low," he said.
"But experienced retailers sign hundreds and hundreds of HP agreements each year and get to know who is high risk."
Most retailers asked questions about income, home ownership and major outgoings before signing up HP customers.
"But one thing retailers can't control is whether a person is telling them the truth," Mr Albertson said.
Retailers could contact large debt recovery companies and gain access to their database to check out a customer.
Mr Albertson doubted a claim that people flocked to sign up for HP deals in the lead-up to Christmas.
"Many major HP items like whiteware, carpet, and furniture are not really items associated with Christmas -- so there wouldn't be a huge upswing during that time," he said.
He said people setting up a home who wanted major essential household items like appliances and whiteware were low risk, because they could usually handle the debts.
A Reserve Bank study released in June on New Zealand's credit markets spanning 20 years, showed household debt has more than doubled from less than 50 per cent of disposable income in 1980.
- NZPA
