Australian Competition and Consumer Commission chairman Graeme Samuel has told SmartCompany today he will be targeting large finance groups such as Macquarie over their involvement in the growing telco scam scandal, saying they should be lenient towards small businesses that have been tricked into paying for equipment they thought would be free.
The comments come after opposition business spokesman Bruce Billson called on the Government to deliver Commonwealth assistance to businesses involved in court battles over the scams.
“I’m saying these companies should have a reasonable stance in regard to the fact there are many businesses involved in these scams,” Samuel told SmartCompany this morning.
The growing problem of telco scams has been highlighted by both businesses and government officials, with Samuel saying thousands of businesses are now caught up in these types of scams.
The telco scams involve signing up small businesses to a new phone plan, usually with the lure of ‘free’ products, such as televisions or other equipment. However, the equipment isn’t actually free and SMEs find themselves signed up to extremely expensive long-term leasing contracts, with costs heading into the thousands of dollars.
“The worst part about it of course is that under the arrangement that the telco company enters into with the finance company, the telco company receives a cash sum upfront, a capital sum and then disappears,” Samuel said last night on ABC’s Four Corners.
As reported by the program, Macquarie Group is taking legal action against thousands of small businesses for breaching these contracts.
However, Samuel says Macquarie, with other finance groups including Cisco and Lloyds, need to act reasonably – and they haven’t indicated they will do so.
“I know these finance companies have now ceased taking these deals. Macquarie have indicated they’ve ceased taking them on from 2007. But the problem is that businesses are still suffering significantly because they are bound by these leasing contracts.”
“I think it would be reasonable for Macquarie to take a stance that there are businesses involved in these scams, and without wanting to allege bad faith on their part, they have an opportunity to demonstrate leniency.”
Samuel says he has not been encouraged by the response from Macquarie.
“We think there are alternatives. One could be that where these companies have paid substantial sums in these leasing contracts, they could just keep the goods and have the rest of the contract waived.”
Greg Stevenson, head of the Telco Finance Scams Association, agrees and says he is attempting to start a class action against several of the finance companies involved.
“We will get a class action together if we get enough people, but it’s hard because we need to get enough for each individual finance company.”
“We have hundreds of victims, it’s just there are several finance companies involved and they all need to have enough involved in each. We’re trying to get more public awareness and split them into groups.”
While Samuel said he would leave “politics to the politicians” in regards to Billson’s suggestion that companies involved in litigation be given Commonwealth assistance to fund a test case, he did say that SMEs need backing when they’ve been duped.
“I think we need to talk to these finance companies, including Macquarie, and ask them whether they’ve understood that when these formal legal contracts were in place, they knew the manner of these contracts and what was going on.”
“For instance, did they check out the credibility and the business background of the telco companies? Was the capital sum a fair price for those goods? Would a reasonable person assume that it was a greatly inflated price?”
As Samuel said on Four Corners last night, the ACCC is looking at potentially tens of millions of dollars in these scams, and if small businesses take these losses then many could potentially go under.
“We’re going to have meetings and look at the law, and see whether there are ways we can help businesses. I think we have to look harder at how we might tackle this,” Samuel says.
In response, Macquarie has said it is “surprised” by comments from the ACCC that it failed to respond to requests.
“Macquarie has cooperated fully with the ACCC and responded to all its requests…in all cases in dispute, customers have ceased making rental payments and refused requests to return equipment to Macquarie. These claims are subject to dispute resolution by independent tribunals and the courts.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
