If a retail business is offering 0% finance (via a finance provider), sometimes for as long as 60 months, who is paying for it?
I love this question - and I happen to know the answer as I used to work for a furniture company that worked this wheeze (scam) back in the 60s.
It's like this -
STEP ONE - You are the furniture company and you import some cheap crappy stuff and mark it up for a silly high price and leave it in the catalog where nobody sees it or buys it.
It sits there for the minimum period required by law.
STEP TWO - Sales day and the 'Comfy-Down Majorette' is shipped out to all stores and displayed in the front window. It is sold for half the (bogus) list-price and people can buy it
INTEREST-FREE AND WITH NO MONEY DOWN AND NO REPAYMENT for up to three years! Wow!
STEP THREE - The credit agreement is signed by the customer with a credit company that happens to be owned by the same company that owns the shop (what a surprise!) What almost no customers never realise (I mean - who reads contracts! It's interest-free if you pay and we are going to pay, so who cares about the small print!) is that
ALL the 25% interest becomes due for the ENTIRE three years if payment is late. And sometimes it ain't 25% but waaay higher and may even contain swingeing penalty clauses.
STEP FOUR -
The credit company is just a forwarding office for multiple such scams. There is no telephone number you can call and it does not seem to even have a bank account.
That office moves regularly. If you have an address from three years ago, any cheques sent there will be returned 'Not known at this address.' Most retail customers are too gormless to look up the latest company address and in my day, they even thought that they could pay at the shop.
STEP FIVE - If you really want to get funky and just to make life for customers a little bit more of a challenge,
the credit company's assets are sold to a new credit company on a regular roll-over basis (and you'll never guess who owns the new company!) and that eventuality is of course covered in all contracts. Now try finding them!
STEP SIX - The three years are up. A credit company you have never heard of sends you a statement of account. That statement says that the 'Comfy Down Majorette' that was listed at £1,000 and sold interest-free for £500 but is now long gone because it was hardly worth £200
is going to cost you £2,000.
STEP SEVEN - After a flurry of letters and final demands, the credit company passes your 'case' to their 'legal' representatives (another bogus company) who now starts the threats at a whole new level and with added costs that seem to just mount-up. After a series of letters marked on the outside 'FINAL DEMAND' in red, you agree to pay for that £200 heap of junk that you no longer have about
£100 a month until the full sum is paid.
I have seen national chains of computer and TV/hi-fi shops do this in the UK. Furniture shops revel in this practice. It is very, very profitable!
In my day,
the entire scam operated from the High Street shop where I worked. In reality, we were the credit company, we were the 'legal' representatives - the lot! Desperate customers came in, asking for the address or details of the credit company or the real identity of those 'legal' representatives - and all the time, the pre-marked envelopes were upstairs in the storeroom.
It was the manager's job to say that he had no control over head-office policy or the behaviour of the credit company. He would like to help, but he couldn't.
It was also his job to send out those letters in a package to be put in the mail in Doncaster, Leeds, or wherever the bogus office was supposed to be.
The same giant chain had three furniture stores on that High Street, all ostensibly competing with one another. One was the 'honest' shop. The others were total rip-offs.
After a few weeks, I quit.
