Small businesses caught up in telco scams are considering launching a class action against the finance companies currently holding the businesses to account for the thousands of dollars they are paying for virtually useless equipment.
Greg Stevenson, head of the Telco Finance Scams Association, says he is currently dealing with hundreds of business caught up in the scams, many of which are paying thousands of dollars for equipment that was promised to them for free.
“It’s only the tip of the iceberg. There are plenty of stories out there, and every day I’m hearing new complaints. There have been businesses that have been closed down, and victims are popping up all the time.”
“I was told I was getting $4,000 of equipment for free. But I’m still paying for it, and in the end I’ve had financing worth about $19,000.”
The issue of telco scams has gained prominence after the Australian Competition and Consumer Commission chairman, Graeme Samuel, told ABC last night that he is focusing on finance companies including Macquarie involved in the telco scams.
Stevenson says he is currently dealing with hundreds of companies being pressured by finance companies into fulfilling the contracts they signed. The companies were offered “free” equipment including televisions and telephones, but were signed up to long-term financing deals that force them to pay thousands of dollars more than the equipment is worth.
“If we can get enough businesses together, we will launch a class action against the finance companies. But the problem is that there are so many people for each different finance company. Once we get enough we can split them into groups and then focus on that.”
“We’re just trying to get all these companies together. (Opposition business spokesman) Bruce Billson is helping, trying to get funding for test cases, but we’re just having trouble with a lot of the finance companies as well.”
Andrew Perrin, who runs Line Marks Southeast Queensland, says he was duped into signing a contract that offered him free equipment for his business, but he has ended up paying far more than that equipment is worth.
“We had a call one day from a salesman telling us he could get us this phone deal for basically the same price, but they could also fund some equipment like a computer, a switchboard and a few other bits and pieces.”
“But that telco fell over, and now we’ve ended up paying nearly $34,000 over the past five years for equipment that is basically worth zero. I’ve seen companies falling over and it’s really hurting people.”
Perrin is currently negotiating with Macquarie Bank, which controls the financing behind his deal. But he argues even getting to that point was a chore, and Stevenson says this has been the case in other negotiations as well.
“Macquarie has delayed a lot of the negotiations and these types of hoops are causing trouble for a lot of the companies.”
“I know of one company owner who had to sell his investment property to take care of the court case, and another who has had to spend thousands keeping his case afloat. It’s really stretching these companies and many are going to fall over.”
Samuel agrees on this point, and said last night he is disappointed with the response from Macquarie regarding a “reasonable” stance towards companies involved in these deals.
But he also says that businesses need to avoid getting into these scams in the first place, saying that SMEs need to take responsibility for their own actions.
Read contracts
Samuel says he has heard plenty of businesses say these deals are “too good to be true”.
“If it sounds too good to be true, then it usually is. Don’t be suckered into these types of deals, and read the contracts you’ve been given.”
Talk to lawyers
“After you’ve read your contracts, you may even want to go over them with a legal representative, just to make sure that what you’re getting isn’t totally wrong,” Samuel warns businesses.
Don’t trust anyone
Samuel warns that a lot of these businesses are being told to ignore finance deals written into contracts.
“Don’t believe that. You can’t take people at their word. Common sense dictates you need to check these contracts out for yourself.”
Check your cash
Samuel warns that businesses caught up in these programs are completely strapped for cash. “These businesses are paying a lot of money. Look at that figure and determine if it’s something that is going to hurt you.
Look at the longer term outlook
These contracts last for years. Samuel says businesses need to consider that if they sign onto an equipment deal they could be stuck with payments for years. “You really need to have a longer-term outlook on these things and see how it’s going to affect your business over that time.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
