This article first appeared in the Business Times section of The Sunday Times on 8 May 2016.
News
broke this week that the National Credit Regulator had received a complaint about
Capitec’s multi-loan product and the fees charged by the
bank.
The
allegations from Summit Financial Partners are centred on a Capitec product it
claims is a series of micro-loans that are approved and accessed via an ATM credit assessment.
The
National Credit Act requires lenders not to enter into a credit agreement
without first taking reasonable steps to assess the consumer’s debt history,
financial means, prospects and obligations, as well as ensuring the consumer understands
the risks and costs of the proposed credit.
The
allegation is that the three questions posed by a Capitec ATM are inadequate
for a full assessment of a prospective customer ’s affordability. Summit also
takes issue with the “initiation fees” charged by Capitec, which can apparently
be as much as 12%.
Capitec
itself has not commented much on the case, but has denied the allegations, suggesting
there is a “misunderstanding of the technicalities”, and that a full credit
assessment is redone for every loan application.
I
personally hope the 12% fee is incorrect and that Capitec will be able to prove
it is not charging people who need that R1 000 mid-month boost, a fee of R120
for a loan. That, in anyone’s books, is just too high — let alone for the lower-
to middleclass Capitec customer.
However,
what really interested me had less to do with Capitec but more with the powers
of the regulator.
I
learned that this matter was pursued by the NCR in 2013, but the regulator was
stopped in its tracks by the National Consumer Tribunal.
Apparently
the NCR relied on the provisions of the act that empowers the watchdog to investigate
cases in its own name, without having to first receive a complaint from the public
or an affected party.
On
the back of the unsecured lending crisis in 2012, the NCR initiated an
investigation into the industry and came across the Capitec multi-loan product and
consulted the bank.
The investigation reached a point where it was clear the
parties disagreed, and the regulator duly approached the tribunal to rule on
the Capitec product and whether it was in breach of the act.
The
tribunal did not even consider the merits of the case, saying the NCR did not
have “reasonable suspicion” to probe Capitec in the first place.
Apparently
this interpretation has also been confirmed by the high court and materially curtails the ability of the NCR to investigate matters it believes require further
analysis.
The NCR is unable to investigate any matter without a complaint from the
public, or without having some miraculously objective proof prompting
“reasonable suspicion”.
The
obvious problem with this is how ordinary citizens would know that their
lenders are not in compliance with the act.
The
other issue is potential “justice delayed”. Had the NCR been allowed to pursue
the investigation in 2013, the matter would have been heard, both sides would
have made their arguments and the tribunal its ruling. This would be good for the
regulator, Capitec and, most important, the customers.
Otherwise,
the government could have knowingly allowed a potentially illegal practice, prejudicial
to ordinary South Africans, to continue for three years and not taken action.
The
encouraging news is that parliament’s portfolio committee on trade and industry
has noted the case and met with the NCR to discuss its powers regarding compliance
with the act “in an attempt to ensure that consumers have quicker access to
redress”.
The
NCR didn’t mince its words to the portfolio committee and stated that its
powers to investigate were limited to “reasonable suspicion” of abuses based on
complaints from the public, and detailed how this had led to various entities
refusing to be investigated.
This
clearly needs to be resolved urgently.
