A good disruption

The Salvation Army launched an ambitious project on Tuesday, rolling out The Good Shop, a new truck shop business aiming to disrupt and reform one of New Zealand’s most notorious industries.
 
Eileen was homeless, living with her sister, when the mobile trader turned up at her door one February morning. She’d bought from a clothing truck before and it had seemed to work well. So when the man offered her a TV, and even offered to chuck in a laptop and a phone—all for just over $20 a week—she agreed. She admits she was naïve. ‘I didn’t think about it. I looked at what they were offering and thought, “I can pay that a week”.’

All Eileen had to do was a quick check on her income (this turned out later to have been a series of wildly inaccurate estimates that didn’t even include her rent as an expense) and sign a few different pieces of paper.

It was agreed she’d get the goods once she’d made the first few payments—all in time for Christmas, the man said. A few months later, when she contacted the company to ask how much she had paid, she was told there was a $20 charge for an invoice. She declined the invoice, but was charged anyway.

When the TV still hadn’t shown up almost a year later, Eileen was told she would get it if she doubled her payments for another 45 weeks. Later, the company would tell her she had to pay everything off in full.

When her sister pointed out she could get the same TV cheaper in a store, she asked to cancel the contract. ‘They stopped the payments—and then they started the payments again. Then they added a $20 fee for me stopping the payments.’

It turned out all those different pieces of paper the man had got her to sign were different direct debit forms, so when Eileen stopped one, the company just started another. Her bank told her it couldn’t cancel the direct debit.

By that time, Eileen had got into a Salvation Army transitional housing programme through Royal Oak Community Ministries. She was seeing a budgeter who also tried to get the contract cancelled—but the company said it would cost Eileen $600 to cancel early. Finally, Royal Oak financial mentor Andrew Mitchell took a complaint to a disputes resolution agency—even then, it took a year and a half before the mobile trader paid Eileen her money back.

Today, Eileen says her life is very different. The Salvation Army team was able to help her into her own home and life is slowly getting better, she says. She is still supported by a social worker, and volunteers at the Royal Oak foodbank to help give back. But she’s still not free of the company.

‘They still come to my house. It’s the same company but different people. I tell them to stop coming, but if you pay once, they keep coming back.’

Buy now, pay later!

The company Eileen dealt with is one of a host of mobile traders and truck shops that travel around poorer areas of cities, targeting people who are struggling.

They sell items such as phones, clothes and electronics, offering people credit to ‘buy now, pay later!’. The deals often seem cheap, but the goods are actually sold at much higher prices than at the shops, with huge interest rates and hidden fees.

They are a poorly regulated part of a ‘third-tier lending’ industry in New Zealand, lending to those the banks won’t lend to. Often their customers are desperate people who don’t have enough to live on, few options and poor financial literacy. It’s a huge and growing industry. Last year, New Zealanders borrowed $4.5 billion from non-bank lenders—including finance companies, pay-day lenders and the trucks. In the past five years, that lending has gone up by 39 percent.

The idea for a Salvation Army response began in late 2012, when Ronji Tanielu and Major Campbell Roberts from The Salvation Army Social Policy and Parliamentary Unit put forward the vision, moved by the ‘desperate need that people were having as they dealt with the trucks’.

That need included extremely vulnerable people being targeted, caught up in unfair contracts and trapped in high debts.

‘One of the common practices was their targeting of people in mental health respite homes. We had reports of that in Porirua, Auckland and Hamilton. It made us think, “How do you disrupt this model?” And we wondered, “What if the Army set up its own truck to try and disrupt and eventually destroy this business model?”.’

The idea was then picked up by Jodi Hoare, now The Good Shop project manager, who had heard similar stories while managing The Salvation Army’s Community Finance programme.
‘It’s often the volume of debt people have and the number of trucks they are in debt to. Also, how it was assessed that they could afford to get something on credit. Some of these trucks, their idea of an affordability assessment is, “What do you earn and what’s your rent?” If you earn more than your rent, you’re eligible for a loan.’

When she asked a staff member from one of the trucks if they would ever choose not to sell to someone if they knew they could not afford it, the person told her, ‘No, we would never not sell to someone’.

Accessing the basics

Jodi remembers seeing the trucks when she was living in Ōtara as a child, but it was those more recent stories and the effects she saw the trucks having on vulnerable people that led her to ‘feel something had to be done,’ she says.

‘You can say, “Something will change”, but the trucks have been here for 40 years and nothing’s happened.’

Since the 2015 Commerce Commission report, Jodi says many of the trucks have made efforts to make sure they’re sticking within the law—but the law is still broad enough to charge huge prices and interest. The reality is that for desperate people, the trucks fill a need without feeling like you’re asking for a hand-out from WINZ or a charity.

‘People use them because they don’t have access to a shop, or access to credit. It’s trucks or a pay-day lender.’

Not being able to access basic things most New Zealanders take for granted, is a big part of the picture that often doesn’t get discussed. Even just doing the weekly grocery shop can be a challenge that keeps some families in poverty, Jodi says.

‘The whole of Ōtara and Ōtāhuhu don’t have a mainstream supermarket from one of the big brands. That’s a population of 20,000 people in two low decile suburbs, where to get to a big supermarket you have to leave the suburb. Through our financial mentoring, we see that people are using the corner dairy or those smaller, more expensive supermarkets for a full shop, or taking taxis, public transport [to larger the supermarkets].’

A positive alternative

More legislation is due to make urgently-needed changes to the laws around lending. The government has proposed bringing shopping trucks under the new law. It’s also suggested the law could introduce a ‘fit and proper person’ test for mobile traders, require them to register on the Financial Service Providers Register, prove to the Commerce Commission that their fees are reasonable if asked and share key loan information with debtors at the start of debt collection activity.

However, the final bill has not been announced and much could change, Ronji says. ‘The government have said some really nice sounding stuff, but until we see what the bill looks like, we don’t know if they will deliver. It’s going to take a lot of bravery to do some of the things we have asked for.’

And even if those changes come, the people who use the trucks now will still need access to credit—which is where The Good Shop comes in, Jodi says.

‘If we take away these options, there needs to be a positive alternative. You can tell others that what they’re doing is wrong, or you can ask yourself, “How can we contribute in a positive way?”. We want to go into the industry to show that it can be done in an ethical way. We hope it helps set a new norm on appropriate and responsible lending.’

The shop is a partnership between the Army, The Warehouse Group and Countdown, with support and funding from the Tindall Foundation, BNZ Bank, the Ministry of Social Development and the Nikau Foundation. Without them, the shop wouldn’t be possible, Jodi says.

It’s not expecting to make money, but with the support of those businesses and without the pressure to make a profit, The Good Shop can sell more cheaply and fairly than other trucks. There’s no 400 percent mark-up, hidden costs or extra charges. The items will be provided as near to cost as possible, with a small delivery fee included.

Operating first in South Auckland and then in Porirua, the vans will be selling up to 180 items from The Warehouse Group, ranging from whiteware, household and garden items, to baby gear, electronics, bikes and toys—as well as food from Countdown.

Each van will come with tablet computers for people to search through a digital catalogue of items, and two staff members—a customer care worker and a community loan worker—to walk them through the process.

For items from The Warehouse Group, the staff will arrange a Community Finance No-Interest Loan for the person, and The Warehouse will then deliver to their door.

Food will not be available on credit, but staff will guide people through the Countdown online shop and Countdown will deliver, Jodi says.

A mission to help

The vans will also carry some emergency food parcels, but the aim is not to be a moving food bank, Jodi says. It’s also not about The Salvation Army and its partners running a shop. Instead it’s about helping people build their own autonomy.

A big part of the loan worker’s role will be providing people with budgeting advice and support. So, if you clearly can’t afford a loan, then—unlike most of the other trucks—The Good Shop won’t give you one. Instead, the loan worker will provide budget advice and help the person get other support they might need from their nearest Salvation Army Community Ministries.
The same applies for groceries, Jodi says. The customer care worker will also be able to offer menu planning and nutritional advice to people, to help them shop smarter.

On an individual level, the shop hopes to be able to transform lives, build financial knowledge and address debts. Overall, Ronji says the aim is to ‘disrupt’ the truck stop industry for good (pun intended).

As the church, says Ronji, we can all be part of this disruption to injustice. ‘I was always interested in the integrated mission idea—how do you get corps, get the church out there in the community, living like Christ. What’s the God aspect, modelling the goodness of God and his mercy and grace?’

Both Ronji and Jodi hope The Good Shop will be just the start of a movement against unfair lending. ‘Disruption happens at scale so I hope there is a commitment in the future,’ Ronji says. ‘But I applaud the Army and its partners for having the guts to start the journey.’