Door-to-door sales methods hurt vulnerable people

Unsolicited, door-to-door sales techniques have long been used to push pricey, often unwanted products onto unwary consumers. The latest industry to adopt the tactic are private vocational training providers. Gerard Brody, CEO of Consumer Action Law Centre, explains how the techniques work and lays out the challenges for policy makers and regulators in protecting the public.

Door-to-door and unsolicited sales are back in the news. Rather than selling energy, vacuum cleaners or gym memberships, in-home sales has become the sales method of choice for private vocational training providers. In recent weeks, both The Age and ABC’s 730 have featured stories about vulnerable people—often unemployed or single parents—being signed up to expensive diploma level courses by private education brokers.

It has commonly worked like this: you’ll receive a telephone call suggesting that you’ll receive a free tablet or notebook computer should you sign up to a new course, perhaps in a field like project management. In some cases, your contact details have been obtained by the salesperson as a result of you applying for a job online. You’ll be told you don’t have to pay now, and that there are government subsidies. You’ll also be told that you don’t need to make a decision straight away—we’ll visit you and explain the details in person in your home.

In other cases, door-to-door approaches occur without a prior phone call. In others still, the entire sale happens on the phone with a salesperson guiding the consumer through an online sign up process.

Last week, Assistant Minister for Training Simon Birmingham announced a raft of reforms designed to crack down on dubious marketing practices by training providers and brokers. The new measures include a ban on training providers offering inducements for enrolments, such as cash, prizes and laptops. Training providers will also be required to conduct tougher assessments of students’ capabilities and be prevented from levying all course fees in a single transaction upfront. These reforms are very welcome and should serve to protect vulnerable consumers. However, the Government has not yet imposed a ban on unsolicited sales, or enrolments over the phone or on doorsteps.

Unsolicited sales methods, which became rampant in the energy industry following deregulation, have again accompanied deregulation of the vocational training sector. Deregulation was meant to provide for consumer choice, and through competition drive innovation and efficiency in the delivery of training. One innovation has been unsolicited sales. In an effort to sign-up new students, some providers outsource marketing to education brokers and sales firms that use true and tried tactics to get a sale. These sales firms are commonly paid via up-front commissions. In introducing choice and competition, however, the government and regulators appear to have forgotten consumer protection and the risks these sales models present for vulnerable consumers.

In 2010, Consumer Action together with Deakin University published research about the psychology of in-home sales. That research found that there are various factors associated with in-home sales that mean consumers are more vulnerable to tactics that impede their rational judgment. For example, the research found that a consumer may be under greater pressure where any ‘invitation’ into the home has come from the consumer: the act of agreeing to be contacted makes it more likely that a consumer will comply with a larger request later, for example, buying the product or service being sold.

It also found that there is a strong social element associated with in-home sales. By being in the home, the salesperson obtains information about a person’s family or lifestyle, enabling them to exert authority or enhance understanding, liking or similarity. These social elements reinforce any earlier commitments since people prefer to say yes to people they like, those they perceive as similar, or individuals with authority.

There can also be huge psychological costs associated with backing out of a transaction once a consumer has committed to a visit, and invited the salesperson into their home. For example, asking someone to leave your house after you have invited them in appears to be substantially more difficult than walking out of a retail store. Simply saying ‘I am not interested’ and walking away is not a realistic option when someone is in your home.

The ‘foot in the door’ effect is also powerful. Consumers subject to in-home and unsolicited sales can be asked a number of questions where the answer is obviously ‘yes’. ‘Wouldn’t you like to improve your jobs skills?’, for example. The offering of something ‘free’ is like the icing on the cake—statements like ‘you don’t have to pay upfront’, or inducements like a free computer, can focus the mind on the initial benefit, rather than the longer-term debt.

Recognising the vulnerability associated with unsolicited sales, the law provides consumers with ‘cooling off’ rights. For students enrolling in vocational training, any government debt associated with the course will not be incurred until the passing of the census date, and consumers can withdraw before that date. However, these protections can lull consumers in to a false sense of security. Behavioural psychology suggests that consumers can experience an ‘endowment effect’, that is, the decision to purchase actually increases desire to own the item. It can also be quite challenging for someone to admit they were wrong in relation to a purchasing decision – this goes against our own ego. More worryingly are recent complaints to our Centre in relation to private training: consumers who have tried to cancel by the census date are referred back to the initial salesperson who then convinces them not to withdraw.

The result of this is that there are many people incurring debts for courses that they will never complete. In some cases the courses are simply inappropriate for the student: online courses, for example, demands a level of discipline that many find difficult to achieve. There is also little evidence that this training helps obtain employment. Rather, the consumer is left of with a significant debt impeding their financial security.

As governments seek to deregulate previously government-run services like vocational training, stronger consideration must be given to creating the preconditions for effective and informed consumer choice. This must be more than providing consumers with basic information about services prior to a sale. We must recognise that sales methods themselves can exploit consumer vulnerability. In the case of private training, this affects the government as much as it does students, given the government provides the funds for the student loan. To ensure training is appropriate to meet a student’s needs and to support the Assistant Minister’s welcome reforms, the next step should be to restrict unsolicited and in-home sales. This would ensure that students can make an informed decision, away from the pressure of a salesman.

Gerard Brody
CEO Consumer Action Law Centre