Young people vulnerable to subprime car loans

A new car costs almost as much as what a home cost 30 years ago. So, affordability is an issue for many Canadians, especially those buying a first vehicle.

Car dealers love to advertise low rates or zero per cent financing, but that assumes you have good credit. What if you have dodgy credit? What if you’re young or a newcomer to Canada and you have no credit history to speak of?

I’ve been trying to help AF, a 20-year-old who ran into big problems with a Toronto car dealer. Despite the intervention of the Ontario Motor Vehicle Industry Council (OMVIC) and Leasebusters, she’s stuck with a vehicle that’s financed at a high 20 per cent interest rate.

She admits she trusted the salesperson and signed contract papers she didn’t understand. (Why don’t young people consult lawyers — or even their parents — before doing such things?) Her only option is to sue. But she’s not sure if she can keep making the payments until her day in small claims court comes up.

Her case is not unusual, according to a recent article in the National Post. It’s a win-win situation for the financing companies:

The pair who got the loan — one with no credit history and the other with a bad credit rating– only qualified for a subprime loan at 18.5%. If all went well, the financing company, Wells Fargo, was set to earn more than $16,000 in interest over six years.

If things unravelled — as they often do in the rapidly growing subprime car loan business — Wells Fargo would be fine. The company would repossess the car, resell it and send a final invoice to the customer for the difference.

Sounds to me as if the U.S. subprime mortgage lending pattern is alive and well in Canada — among car dealers. And as the National Post points out, the Big Five banks have been buying up the second-chance car lending institutions.

See the comments below that describe AF’s dilemma and what others I consulted said about it. If you have any advice for her, you’re welcome to add your opinion.

Is your credit card being upgraded?

There’s lots of this upgrading going on. Last Saturday, I wrote about Visa cardholders being upgraded to Infinite Visa and Amex Gold cardholders being upgraded to Platinum.

After the column was published, I also heard from Sears cardholders who were getting letters about being upgraded to a Sears MasterCard.

Upgrading is good, I guess, if you get more benefits for the same annual fee. But why can’t the card issuers let you keep the same number as before?

It takes time and effort to change all the pre-authorized payments you may have linked to your credit card. Credit card companies are offering to do these transfers for you and giving you bonus points for the inconvenience. But that requires monitoring, as some cardholders found when their bonus points did not arrive as promised.

Another issue is the use of negative option marketing. The companies send you a letter describing the change. If you don’t want the upgraded card, you have to call and opt out. If you do nothing, you get a new card in the mail — whether you want it or not.

This can be a breeding ground for identity thieves, a forensic accountant told me. What if a fraudster sends out such letters and asks you to call a special number to opt out? There you are, giving out confidential information on the phone, without realizing you’re talking to the wrong people.

His tip: Always call the number on the back of your credit card, not the one that you’re given in a letter or email.

Calling Home Depot….

This Atlanta-based home improvement chain likes to promote its friendly customer service. But I get a steady stream of complaints, particularly about installations, that suggest the image is just skin-deep.

Dick Smyth, a well-known Toronto CHUM radio personality who has retired to cottage country, still rants about controversial issues that cross his path. His latest email to me was about his unhappy dealings with “Big Orange.” I’ve posted it as a comment below.

He’s annoyed about the lack of access to contact information for complaints.

The front office is unable even to provide either an e-mail or postal address at which I can complain. A dissatisfied customer apparently is a new experience for them.

That made me dig up an email I got from a former Home Depot employee. He spilled the beans on how to get head office to pay attention.

Any customer of the Home Depot who is not getting the service or attention they deserve can call the “Ben Hill” line (the toll-free number is posted in every store at the customer service desk). When the rep from “Ben Hill” calls the store manager back, things start to happen in a hurry! Trust me on this!

I worked at the phone order desk at three Home Depots for 6 years and I know that store managers live in healthy fear of “Ben Hill”. These calls are monitored at head office and figure prominently in managers’ performance evaluations.

So, I had to ask: why Ben Hill? Here’s what my whistle blower said:

In the Home Depot context, it’s an invention. But there WAS a historical “Ben Hill”.

Somebody from Home Depot liked the name, which is also the name of a county in northern Georgia. They thought it conveyed an image of a wise old uncle who could soothe ruffled feathers and right wrongs.

The Home Depot gave the Ben Hill department a lot of autonomy and the authority to make pro-customer decisions without being under the thumb of some desk jockey manager at head office. Ben Hill reported only to the company president.

Their office was not at company headquarters (but it was in the Atlanta area) and no one at head office except the CEO knew who worked there.

When a Ben Hill rep calls a store manager and tells that manager to do some particular thing, the store manager can do what Ben Hill says without getting permission from either the district manager or from head office.

Finally, I asked Tiziana Baccega, a spokeswoman for Home Depot Canada, if this was true.

Hi Ellen, this is true. It is our Customer Service phone number and anyone can call 1-800-668-2266 to reach the Canadian call centre.

Here’s the response from Dick Smyth:

They sure as heck didn’t have “Ben Hill’s” number at the Bracebridge store. But if nothing else, it provided grist for my radio comment.

June 14, 2008
It’s a question of bang for a buck.

I’m currently jumping through hoops with one of the big stores over a stove warranty. Never mind… it would take much longer than my sixty seconds to explain.

Quite coincidentally, my pressure washer expired of old age. I decided to buy a new one… not at Big Orange (as I’ll call it) — who needs another hassle? — but at Canadian Tire.

A week later, the same washer went on sale for seventy bucks less. CTC has a policy of refunding the difference but I was one day past the deadline. No problem…zip…swish… click…and my card was credited with the difference.

Bottom line? I’m PO’d with Big Orange. They lost one sale already and many more in the future. And guess who we badmouthed at our Saturday bar-b-que with several friends.

But I have a fuzzy warm feeling about Canadian Tire. I may have cost them seventy bucks. But that bought a really happy customer who will spend that several times over in coming months.

And who praised them to the sky at that same bar-b-que.

Waiting for lower wireless phone rates

We all know cellphones are costly in Canada, especially when used for long-distance calling or data transmission. Recently, I talked about the high prices we pay for wireless on CBC radio (the Business Network and the Sunday Edition).

Many people agreed with me. But Julie Smithers, a spokeswoman for Telus Mobility, had a more positive spin on the story. Here’s her response.

It is true that Canadians have embraced wireless – in fact, we LOVE to talk, and are at the head of the pack for minutes of use. What’s more, when you look at those who could actually use the services (i.e. not children, very old individuals and people living in extremely remote areas), the real penetration rate is well above 80 per cent.

In countries that appear to have higher penetration rates (for instance, Italy and most European countries), these figures are badly distorted due to the common practice of carrying multiple SIM cards to avoid hefty roaming fees. In Canada, users do not pay roaming fees when travelling within the country.

In Canada, competition for wireless subscribers is fierce, with more than two dozen carriers duking it out day-by-day to bring consumers the newest phones, best rates and fastest network technology available in the world. TELUS alone invests close to half a billion in the average year into our wireless business to make sure it is industry leading.

This year’s figure will be much higher, as we are currently in the bidding for advanced wireless spectrum to ensure that Canadians continue to get all the cool wireless services they want. Despite the obvious challenges of massive geography and low population density, Canadians were amongst the first in the world to benefit from a nationwide 3G network.

Some of the 3G applications that Canadians have been enjoying for years now include cellphone based GPS navigation, streaming XM radio and live TV broadcasts, to name a few. For convenience, these value added features can be charged directly to your cellphone bill, but are totally optional and independent of the voice and text use of a cellphone.

In the Merrill Lynch Q1 ’08 report on the Global wireless industry, you will see that Canadians are actually getting a great deal for their wireless service – just look at Revenue Per Minute, one of the best indicators of actual price. It shows Canadians are actually paying LESS than the average price in developed countries and most emerging markets. And our prices on the decline. In fact, since 2001, wireless prices have plummeted 45 per cent!

Smithers sent me a copy of the 190-page Merrill Lynch report. I found an interesting nugget inside, showing that Canadian wireless carriers have a high Average Revenue Per User of $61 (Canadian). Only Ireland is ahead of us at $63 (U.S.).

The ARPU leaders include Norway ($59 U.S.), Switzerland ($55 U.S.), Japan ($52 U.S.), the United States ($52 U.S.) and France ($49 U.S.). Hong Kong is the developed country market with the lowest ARPU ($22 U.S.).

The SeaBoard Group, a telecommunications consulting firm, published a terrific report last year, Lament for a Wireless Nation, A Cross-National Survey of Wireless Service Prices: Canada, the United States and Europe. You can find a summary online. It argues that Canada’s high cellphone prices have inhibited demand for wireless services.

The current auction of wireless spectrum will open the market to new players. But any new national carrier — Globalive seems the likely winner — will have to grab significant market share from the expensive, feature-packed offerings that Bell, Telus and Rogers provide.

Let’s hope that competition will result in lower wireless rates or even, dare I say, a price war. Meanwhile, we all wait breathlessly to hear if Rogers will drop its wireless data prices when it introduces the Apple iPhone on July 11.

Bell vs Rogers, part two

When I first waded into this debate, I thought Rogers was the clear winner. Now I’m not so sure.

Bell still isn’t great at resolving problems on the first call. But the executive team handling escalated complaints is very efficient. Kevin Crull allows his email address to be published and answers emails. He’s accountable.

Rogers is hard to reach. The guy at the top, Ted Rogers, doesn’t respond quickly to letters addressed to him. There’s no easy way to escalate your complaints, even if they’re urgent.

Hardly a day goes by when I don’t hear from someone about Bell or Rogers. But the pain level is higher in the Rogers complaints. People are suffering from bad advice and stupid mistakes.

For example, you give specific instructions to Rogers to disconnect your phone and Internet on the day you plan to move. But Rogers disconnects these services three or four days early, leaving you vulnerable.

VK, a reader, sent me her story of how she found Bell easier to deal with than Rogers.

I separated from my partner some months ago. He moved, but neglected to change the Rogers service. I made several attempts to explain this to Rogers, asking that the account be changed to my name. I was told this was impossible because of privacy concerns.

Since I planned to move, I kept the services and continued to pay the bills. Two weeks ago, I called to arrange a transfer of service to my new address. Same story, but I was told I could cancel service and put in a new order, with no connection charges. I agreed, on the condition that I be assigned a 416 phone number, as part of my internet, cable, phone package.

No problem, said the rep, but his computer was about to crash and he’d call me in 30 minutes with the new phone number. Six hours later, I called back. I was told there were no more 416 numbers, too bad, and the rep shouldn’t have told me I could have one.

More than a week and several calls later, I decided to try Bell. Not only did I get a real person, no “hold please” only to be forgotten or cut off, but I got a 416 number, as well as a much better package of internet and TV services. I can ignore the beavers for this!

Bell called twice to check that their installation date was workable, even arranged to come sooner, so I could have real email again.

It took over a week to cancel the Rogers order. When I said why I was calling, I had to be transferred to someone else and the line went dead or I was on hold for more than 15 minutes.

I had two annoying automated calls reminding me about installation, and today I finally got through to a person, but she could only cancel my phone order. I had to be turned over to yet another person, who said he’d try to cancel my internet, but I shouldn’t have waited so long.

I’m back with Bell. They can’t be more frustrating than Rogers!

Who’s better? Who’s worse? Are they equally annoying? Opinions, please.