Mothers Day Tradition Around the Corner and So Is The Tradition of Price Gouging
Mother's Day is coming up. The traditional day for Mothers is August 15, however, this year, the legal holiday is being moved to August 21, causing confusion among many people, who will no doubt celebrate two Mother's Days this year.

How can you not give a gift to mother on he day on August 15?

And that also brings another tradition, the tradition of price gouging by retailers cashing in on the consumer frenzy that surrounds Mother's Day.

It has become a well known tradition that prices jump sharply just before the holidays and Mothers Day is no exception.

The Ministerio de Economía, Industria y Comercio (MEIC) is recommending that consumers "walk and compare". In an inquiry by the MEIC, they found a difference of ¢72.500 (us$140) in the price of 12 cubic foot refrigerators offered by retailers.

More interesting and to the point is the ¢42.500 (us$85) price difference at different retailers on the same make and model refrigerator - Atlas AF28.

Appliances are a traditional Mothers Day gift, that include not only large appliances like refrigerators, stoves and washers and dryers, but also rice cookers, coffee makers, pressure cookers, toasters, microwave ovens and television and stereo sound systems.

And the MEIC is keeping an eye on these types of products and major retailers and their pricing policy. However, it in the end it will be up to the consumer to make a complaint to the MEIC on price gouging.

Another tradition that takes advantage of consumers if the cost of financing. The majority of major retailers offer "in house" financing or credit on their products, financing that can cost as much as 60% or more per year in interest.

The pricing promotion is not generally on the final price of the item, but rather, the "quincena" - every two week - payment plan. In Costa Rica, most workers are paid on the 15th and 30th of each month, and retailers offer payment plans that coincide with pay days.

Jorge Woodbridge, vice-minister of the Ministerio de Economía, Industria y Comercio (MEIC) is heading an investigation into the credit practices of retailers and the way they calculate the interest on their credit and how it is explained to the consumer.

The MEIC has regulations that obligates a retailer to clear explain the credit policies and financing costs. The ticket price of an item is to clearly spell out the "cash" price of the item as well as the final price and cost of financing if bought on credit.

The regulations are clear. If a consumer purchases an item for sale at ¢100.000 colones and opts to buy on credit for 36 months at 30%, the total interest for the period if ¢58.820 for a total cost of ¢158.820 and with monthly payments of ¢4.245 colones.

However, if the retailer does not clearly spell out the interest provision, including the rate and the calculation, the consumer could easily end up paying 50% or more in interest without realizing it. Many retailers take advantage of consumers who are not accustomed to amortized interest calculations.

To that end the MEIC has made available on its website www.consumo.go.cr an interest calculator so that consumers can see if they are being "garroteado". (The amortizaton calculator can be found at http://www.consumo.go.cr/consumidor/amortizacion.aspx)

Another complaint by consumers is that they really never know what they are paying for interest. Some retailers will only spell out the final price and the financed price, which is lowered to be more affordable to a greater number of consumers.

In store advertising and ads placed in local newspapers often don't quote the price of the item, but rather the monthly or "quincena" payment and consumers often price compare on the affordability - the payment price - of the item and not the total cost.

One retailer advertised on Sunday a General Electic stove model JS807for only "¢4.400 per quincena". The ad does not spell out the financing terms - interest rate or term of payments - on or near the payment rate. To comply with the law, it states the price if paid in "cash" and at the bottom of the ad, in small print, spells out the financing term.

The stove advertised, for example, is being sold on credit at a financing cost of 54% per year on a 36 month basis. The total cost of the item, including the cost of financing comes to ¢368.629 colones. Doubt that many consumers are looking that far down on the advertising page.

Woodbrigde has come out publicly to warn retailers that they will follow up on retailers that violate the consumer laws and is urging consumers to shop around and to report any cases of abuse. The vice-minister added that retailers can be fined and face legal problems if they continue the practice.