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DWS Investors

Knock it off – selling solar panels door to door

By Jonathan Brown

In mid-2016 the Consumer Action Law Centre (CALC) applied to Consumer Affairs Victoria’s (CAV) Tenancy Assistance and Advocacy (TAAP) and Consumer Assistance and Advocacy (CAAP) Innovation Fund grants program to undertake a research project examining unsolicited sales and consumer harm.

The report identified three “consumer harm hotzones”. The first is the solar panel retail industry—over half of the case studies presented in this report relate to the unsolicited sale of solar panels. It is clear that these sales are causing systemic consumer harm, and regulators must act to mitigate that harm. The report raises the possibility of an industry-specific trial of the opt-in model, to be applied to the unsolicited sale of solar panels. Given that the COAG Energy Council has recently announced its intention to develop an industry-led Code of Conduct for the sale of new energy products and services, the timing (and administrative machinery) for such a trial may be right. It should be noted that the energy sector generally has a long history of poor unsolicited sales practices—to the point where major energy retailers voluntarily chose to discontinue the practice in 2013 following significant public complaints.

Solar panels are frequently sold on the illusory (or at the very least, grossly over-stated) promise that they will save the consumer significant amounts on their electricity bill. Often it is falsely stated that once the consumer has paid off the panels, they will have no further electricity bill at all.

There is an intrinsic appeal for low-income and often welfare dependent consumers in being able to limit their energy costs, and salespeople frequently leverage growing anxiety over rising energy costs in order to facilitate a sale. Salespeople are also advantaged by the technical nature of the product (and the energy market generally), which means that consumers are unable to fully grasp the deal being offered, and instead find themselves having to trust the salesperson—and inclined to believe the promises being made. Very often this trust is misplaced, as the complex and technical nature of the product frequently results in poor or failed performance. The promises made are seldom kept.

The fact that the correct price for solar panels is not widely known also means that consumers are vulnerable to over-charging, and have little market intelligence to fall back on when assessing the deal. Consumers generally do not understand how solar panels work, how many they are likely to need, and what the actual impact on their energy costs will be. At the same time, the desire to future proof against rising energy costs is strong. This plays into the hands of unscrupulous sales staff.

The frequent (in our experience, almost universal) use of ‘interest free’ finance to fund the panels only adds to the obfuscation, and leaves people vulnerable to unjustified mark-ups. The ‘interest free’ nature of the product is crucial in closing the sale and enticing consumers to commit. Unfortunately, very often the payment plan offered is unaffordable for the consumer and appears to be made without any rigorous assessment of their capacity to pay.

The industry is essentially made up of small to medium sized businesses which seem to exhibit high degrees of variance in terms of professionalism, operating style and legal compliance. Attempting to set standards for such an industry through the auspices of an industry body like the CEC, while laudable, is a quixotic task. Comprehensive oversight of a diffuse sector is likely to be only achieved through specific industry regulation. In the context of this report, the solar panel industry seems a logical industry in which to trial an opt-in requirement for unsolicited sales (Currently there is a 10 day opt-out policy). This could be done for a limited period or in limited jurisdictions in order to gauge the effectiveness of the protection—not just in terms of preventing consumer harm, but also in terms of how much impact it has on legitimate commerce—if, in fact, it has any impact at all.

For a full copy of the report go to: http://policy.consumeraction.org.au/2017/11/20/knock-it-off/

Energy Stuff fully supports all moves to ban the door to door selling of solar panels

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