National Consumer Commission v Lynx Chemicals CC (NCT/127619/2019/57(1)) [2020] ZANCT 8 (24 September 2020)

IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN CENTURION

Case number: NCT/127619/2019/57(1)

In the matter between:

NATIONAL CREDIT REGULATOR APPLICANT

and

DACQUIP FINANCES CC trading as

ABC FINANCIAL SERVICES PINETOWN RESPONDENT

Coram:

Adv J Simpson – Presiding Tribunal member

Prof T Woker – Tribunal member

Adv F Manamela – Tribunal Member

Date of Hearing - 16 September 2019

Date of judgment - 24 September 2019

JUDGMENT AND REASONS

APPLICANT

1. The Applicant in this matter is the National Credit Regulator, a juristic person established in terms of section 12 of the National

Credit Act, 34 of 2005 (“the NCA”), (“the Applicant” or “the NCR”).

2. At the hearing, Mr R Stocker, senior legal advisor, represented the NCR.

RESPONDENT

3. The Respondent is Dacquip Finances CC, trading as ABC Financial Services, a registered credit provider with registration number NCRCP

1327 (“ABC” or “the Respondent”). ABC’s premises are at Shop 30, Pine City Centre, 24 Hill Street in Pinetown.

4. At the hearing, Adv R Michau of the Pretoria Bar, instructed by Lewies Attorneys, represented ABC.

APPLICATION TYPE

5. The Tribunal is considering an application for the deregistration of ABC as a registered credit provider, in terms of Section 57(1) of the National Credit Act 34 of 2005 (“the NCA”).

BACKGROUND

6. It appears from the application documents that ABC registered as a credit provider in August 2007[1].

7. The NCR conducted a scouting exercise in the Mooiriver area of Kwa-Zulu Natal and decided to view ABC’s premises located in

Pinetown. An advertisement board on the premises displayed “instant loans”. The advertisement created a suspicion in the NCR investigator’s mind that it may not be conducting proper affordability assessments. The investigator entered the premises posing as a customer, and an unidentified employee informed him that the interest rate applicable to loans was 30% per month. The NCR decided to initiate a complaint and proceed with an investigation.

8. The NCR did a search on the name “ABC Financial Services” and the name of “Corpclo 538 CC” registered on its systems. The investigation was therefore initially opened against “Corpclo 538 CC”, and this is the name appearing on the NCR memorandums and inspector certificates. When the inspectors arrived at the premises of ABC on 21 November 2018, they were informed by the manageress (Ms Cindy Mitchley), that ABC Financial Services was the trading name of Dacquip Finances CC. However, the same member, Mr Jacques Laurenzo Mitchley, owns Corpclo 538 CC and Dacquip Finances CC. Corpclo 538 CC also owns other branches as a credit provider and also trades under the name ABC Financial Services. Dacquip Finances CC owns the specific Pinetown branch. The NCR confirmed this information on their systems and then proceeded with the investigation against Dacquip Finances CC. It later amended its certificates to reflect the correct name.

9. The inspectors requested ten credit agreement files from the manageress as samples. The manageress informed them that the branch

grants short term credit to a maximum of R8000.00.

10. The inspectors found the following contraventions of the NCA –

10.1 ABC failed to file prescribed statutory reports with the NCR since the inception of its registration in 2007. Failing to file these returns is a contravention of General Condition 3 of its conditions of registration read with Section 52(5)(f) of the NCA and Regulations 62 to 68 of the NCA.

General Condition 3 reads as follows –

“The registrant must submit the reports and returns as required in the regulations applicable to the registrant, within the specified time period.”

10.2 ABC was found to have entered into credit agreements without taking the necessary steps to assess the consumer’s existing financial means prospects and obligations accurately (did not conduct proper affordability assessments). The files contained an income and expenses assessment. However, the expenses table only contained very basic deductions. They did not reflect any information regarding existing loan repayments. The ten sampled files did not contain any records of credit bureau information for the consumers. The failure to access credit bureau information is a contravention of Section 81(2)(a), read with Section 80(1), 81(3), Regulation 23A, Section 170 and Regulation 55(1)(b)(vi) of the NCA. In the alternative, the NCR asks that ABC be found guilty of failing to retain the relevant documents used in the assessment for three years, as required by Regulation 55 of the Regulations. The NCR further requests that the ten sampled credit agreements listed in the founding affidavit be declared reckless. At the hearing, the NCR mentioned that it would be withdrawing some of the reckless lending charges. This was due to ABC producing some credit bureau records for these transactions. However, The NCR did not clearly explain which charges, applicable to which consumers, were being withdrawn. The Tribunal will evaluate the evidence as a whole and make the relevant findings where applicable.

Section 81 states -

“Prevention of reckless credit.—(1) When applying for a credit agreement, and while that application is being considered by the credit provider, the prospective consumer must fully and truthfully answer any requests for information made by the credit provider as part of the assessment required by this section.

(2) A credit provider must not enter into a credit agreement without first taking reasonable steps to assess—

(a) the proposed consumer’s—

(i) general understanding and appreciation of the risks and costs of the proposed credit, and of the rights and obligations of a consumer under a credit agreement;

(ii) debt repayment history as a consumer under credit agreements;

(iii) existing financial means, prospects and obligations; and

(b) whether there is a reasonable basis to conclude that any commercial purpose may prove to be successful, if the consumer has such a purpose for applying for that credit agreement.

(3) A credit provider must not enter into a reckless credit agreement with a prospective consumer.”

10.3 ABC was found to have charged initiation fees and interest which exceeded the maximum permitted by the NCA. The maximum interest rate a credit provider may charge on a short term loan is 5% per month. As an example, in the transaction of Moorosi[2], ABC charged an amount of R43.97 for interest. The actual permissible amount was R37.03. For the same consumer, it charged R166.00 as an initiation fee. The maximum permissible amount was R151.50. This overcharging occurred in numerous instances of the ten files

assessed. The overcharging of fees is a contravention of Section 100(1) of the NCA.

Section 100(1) states -

“Prohibited charges.—

(1) A credit provider must not charge an amount to, or impose a monetary liability on, the consumer in respect of—

(a) a credit fee or charge prohibited by this Act;

(b) an amount of a fee or charge exceeding the amount that may be charged consistent with this Act;

(c) an interest charge under a credit agreement exceeding the amount that may be charged consistent with this Act; …”

10.4 ABC was engaged in misleading advertising. By advertising the phrase “Instant loans,” it was leading customers to believe that they would not have to provide proof of affordability. The misleading of consumers is a contravention of section 76(4) of the NCA.

Section 76(4) states –

“(4) An advertisement of the availability of credit, or of goods or services to be purchased on credit—

(a) must comply with this section;

(b) must contain any statement required by regulation;

(c) must not—

(i) advertise a form of credit that is unlawful;

(ii) be misleading, fraudulent or deceptive; or

(iii) contain any statement prohibited by regulation; and”

11. The NCR wants the Tribunal to order the following –

11.1 Cancel the registration of ABC as a credit provider;

11.2 Impose an administrative fine;

11.3 Interdict ABC from future breaches of the NCA; and

11.4 Order ABC to appoint an independent auditor to determine all the overcharged fees and interest and to reimburse all its consumers.

POINTS IN LIMINE

12. ABC raised two points in limine. It firstly submitted that the NCR did not have a reasonable basis for initiating a complaint and investigation. Secondly, it submitted that the NCR should have given ABC a reasonable opportunity to respond to the charges before referring the matter to the Tribunal.

Reasonable basis

13. ABC submits that the phrase “instant loans” could not have created a reasonable suspicion that it was engaged in prohibited

conduct. The phrase can reasonably be interpreted to mean that ABC was efficient in the processing of loan applications and the

disbursement of the loan amount. Regulation 21 of the NCA does not list this phrase as prohibited. The NCR does not state the name of the employee that mentioned the 30% interest rate. As ABC does not charge this rate, there would be no reason for an employee to mention this rate.

14. The NCR submitted that an ordinary meaning of the phrase would create the impression that ABC does not conduct proper affordability

assessments. The inspector formed a reasonable suspicion of prohibited conduct. The inspector merely made an inquiry as a customer. He did not ask the name of the employee. His affidavit stating his version is on oath.

15. In the Tribunal’s view, it is well-known that the NCA introduced a far more rigid and onerous process on a credit provider

when assessing and approving loans. Any reasonable person would expect a loan application process to take some time and require the submission of numerous documents. The phrase “instant loan”, in an advertisement from a credit provider, conveys a very different impression of the credit provider’s process. The phrase creates a very distinct impression that the loan application process may be curtailed or less onerous in some way. The impression immediately creates a basis for being suspicious of the application process and whether it complies with the NCA.

16. The inspector confirmed on oath that he was told a 30% interest rate was charged. Whether or not this was the truth is not relevant

to whether there was a reasonable basis for the investigation. No evidence was submitted to show that this evidence was false. Be that is it may, the advertisement already created a reasonable suspicion of possible wrongdoing by the credit provider.

17. The Tribunal is satisfied that the NCR had a reasonable basis for suspecting that ABC was not complying with the NCA. The first point

in limine is therefore dismissed.

Prior opportunity to respond to the charges

18. ABC submitted that the NCR should have granted it an opportunity to respond to the charges before referring the matter to the Tribunal. It bases this submission on the matter of National Credit Regulator v Capitec Bank Ltd and Another (A440/2014) [2016] ZAGPPHC 125 (23 March 2016) SAFLII. In this matter the court stated -

“Within this framework the NCR is required, as far as reasonably possible, to achieve the correction of non-compliance with the provisions of the NCA by credit providers, impartially, while at all times observing audi alteram partem up to the stage that the unresolved issues inevitably are to be referred to the tribunal. A unilateral fault finding mission with the sole purpose of securing a hearing by the tribunal, as has happened in this case, is at odds with Constitutional values and principles and is therefore to be deprecated. I have no doubt that had the perceived transgressions by Capitec, that were discovered in Gobodo’s investigation, been addressed by mutual co-operation and in the spirit of bettering the interest of the credit consumer industry as a whole (as articulated in s 3(a) of the NCA), a hearing before the tribunal could have been averted.

19. Based on this statement by the court, ABC submitted that it should have received prior notice of the charges against it. As the NCR failed to do this, the entire application should be dismissed.

20. The Tribunal notes the statement by the court and certainly agrees with the general sentiment expressed. However, the NCA does not contain any provisions that require the NCR to give notice of the charges against a credit provider before it refers the matter to the Tribunal. There is no indication in the judgment that it found the lack of this advance notice step in the NCA to be unconstitutional.

It appears to the Tribunal that the court was attempting to provide good guidance to the NCR on resolving disputes, in the interests of the credit market as a whole. However, there is no basis for finding that advance notice of the charges is now a new requirement, before any matter can be referred to the Tribunal.

21. The statement by the court can further be seen in the specific context of the facts of the matter. In the Capitec matter, the NCR

did not provide any evidence whatsoever of any reasonable basis for the investigation. On the facts, it was found that the investigation

was lodged as a “fishing expedition”. It is within this context that the actions by the NCR were seen to be wholly

unconstitutional and unlawful. If the NCR does not have any reasonable basis for a formal investigation and referral, then a mutual cooperative process would certainly be warranted.

22. The Tribunal finds that the NCR was entitled to refer the complaint to the Tribunal. There is no requirement in the NCA that the NCR should have provided ABC with advance notice of the charges. The second point in limine is therefore also dismissed.

Incorrect appointment certificates

23. ABC also referred to another point in its answering affidavit which followed directly on the points in limine. It was not listed or specifically referred to as a point in limine but will be addressed as such.

24. ABC submitted that the original section 25 certificates, appointing the inspectors in the investigation, referred to Corpclo 538 CC as the credit provider. New certificates, issued in December 2018, referred to the correct credit provider. ABC submits that the original error on the certificates is fatal to the process and it cannot be rectified after the fact.

25. The NCR explained how the initial error on the certificates occurred. The error was due to an apparent misunderstanding when accessing the NCR’s records. The NCR’S report states that the manageress confirmed that certain of its other branches also traded as ABC Finances. The cause of the administrative type error is therefore clear. ABC did not submit any evidence to the contrary. It was at all times clear to ABC which company was being investigated. There is no evidence of any confusion on the part of ABC or undue prejudice to ABC during the investigation. The Tribunal is therefore satisfied that the initial description error on the certificates does not render the investigation or the referral invalid.

THE ADMITTED AND DISPUTED CHARGES

26. Based on the contents of the answering affidavit and as confirmed at the hearing, ABC does not deny certain of the charges against it.

27. ABC admits the following –

27.1 It charged initiation fees in excess of the maximum permitted by the NCA. It submits the excess charge was due to a human error in calculation. Of the 10 sample files, it admits to overcharging in 5 of the agreements. The amounts overcharged range from R7.65 to R14.50;

27.2 It failed to file its statutory returns to the NCR as required by the NCA. It submitted that it is busy with the process of bringing all the returns up to date;

27.3 It failed to access the credit bureau information for 2 of the sampled credit transactions; and

27.4 ABC did not address the allegations of excess interest being charged in 4 of the credit transactions. The answering affidavit makes no mention of these allegations, and ABC did not address it in the hearing. In accordance with Rule 13(5)[3] of the Rules,[4] these allegations are then regarded as admitted by ABC.

28. ABC denies the following –

28.1 That the contraventions as alleged are “repeated” contraventions. It submits that a “repeated contravention”

implies that the Tribunal or a court has previously found ABC guilty of prohibited conduct. It has not previously been found guilty of any charge, and it is therefore not guilty of “repeated” conduct;

28.2 That it did not conduct proper affordability assessments. It attached copies of customer bank statements showing that it did request the bank statements;

28.3 That it did not access credit bureau information. It attached copies of credit bureau reports for the customers. The reports are all dated 16 April 2019. However, ABC pointed out the record of previous inquiries on the report. The list shows “ABC CASH PLUS – PINETOWN” as having accessed the credit bureau information on various occasions for each customer. ABC submits that this proves that it did access credit bureau data as required; and

28.4 That the use of the phrase “instant loans” constitutes misleading or deceptive advertising. ABC submits that the phrase is only indicative of its efficiency in processing loans; it is not misleading or deceptive.

Repeated contraventions

29. The Tribunal has consistently issued judgments confirming that two or more contraventions of the NCA constitute “repeated”

conduct, as required by Section 57. The section does not refer to “previous findings of prohibited conduct” or anything

similar. If the legislature intended “repeated contraventions” to mean “previous convictions” or “findings”

then it would have stated this clearly.

“Instant loans”

30. The NCR has asked for a finding that the phrase “instant loans” constitutes misleading or deceptive advertising.

31. Regulation 21[5] specifically sets out the phrases and words that advertisements for credit may not use. The phrase “instant loans” or anything similar does not appear on this list.

32. Although the Tribunal has found that the phase constitutes reasonable suspicion of possible prohibited conduct, it cannot be elevated to the level of unlawfulness. An amendment to the regulations will be required if this phrase is to be declared unlawful.

Proper affordability assessments

33. Section 81(2)(a) of the NCA requires a credit provider to assess a consumer’s debt repayment history and existing financial means, prospects and obligations.

34. ABC submitted that it did make credit bureau inquiries on the consumers in 8 out of 10 of the agreements. It further submitted that it requested bank statements and used the information.

35. A consideration of some of the credit applications in this matter provides a very useful, albeit shocking, insight into ABC’s credit approval process and business.

36. In the interests of privacy, the judgment will only refer to the consumer’s initials in the judgment

37. The credit application of “SD” can be found on page 78 of the application. The credit agreement is not dated, as the date field has not been completed. The terms and conditions page is also not dated. The date on the income and expenditure document is 8 July 2016. This document reflects the gross monthly income of the consumer to be R11 459.12. It only reflects deductions of R133.50 for UIF and R1260.50 for pension. The total net income is reflected as R1 394.00; this is patently incorrect (this error was seen on all ten the sampled files). The net income should have been reflected as R10 065.12. The expenses table reflects a long

term insurance expense of R2 425.00, transport costs of R500.00 and groceries of R500.00, adding to a total of R3425.00. The monthly

expense is deducted from the net income, the form, therefore, reflects a disposable income of R6 640.12.

38. The bank statement attached is for the period 23 February 2018 to 23 March 2018. It reflects an income of R13089.51 received on 23 February 2018. Within approximately ten days, by 4 March 2018, the account only has a remaining balance of R25.95.

39. The salary slip attached is for the period 1 June 2016 to 30 June 2016. It reflects a monthly income of R11 981.15 and a net income of R9 822.00. This information does not match the information on the income and expenses form whatsoever.

40. SD was then granted a loan of R2 510.00. The total amount payable, including charges, is R3 145.63, repayable over two monthly instalments of R1572.82 each. The 3% interest component is only R138.59. The total charges, including initiation fees, service fees and VAT, then brings the total to R635.63. Based on the repayment date in the agreement, this loan was granted in March 2018. The income and expenses form and the salary slip are therefore dated approximately two years prior to the loan being granted.

41. ABC submitted a credit report for DS. This report was not on the original file provided to the NCR during the investigation. Based on the contents, it appears that DS had received approximately 52 monthly loans from 2016 to 2018. The loans were only from two credit providers, “Speedy Dollar” and “ABC Financial Services”. It appears that the loans were granted every month and constantly “rolled over” from one month to the next. None of the information contained in this report

appears to have been captured or assessed in any way when approving the loan for March 2018.

42. The date of the loan is two years after the affordability assessment was done. The salary slip is also dated two years before the loan. No new affordability assessment was done on this loan. The only new document appears to be the bank statement, which was in any event ignored as a source of determining whether the consumer could afford the loan repayment.

43. Based on this evidence, the conclusion is inescapable. The consumer applied for a short term loan in 2016. The loan was repayable in a month or two at most. He was unable to repay the loan, and the only option available was to continue borrowing every month and thereby “roll-over” the loan to the next month. He was caught in a debt trap from which there is no apparent escape. The credit provider is able to take advantage of this situation by continually charging the full fees every month for these loans. ABC did not ask for any new or current income and expenditure information for every subsequent loan. It simply used the information from the first application and granted each loan as a matter of course.

44. Any reasonable credit provider, looking at the bank statement information and the credit bureau report, would reject the income and expenditure information provided. It would immediately be apparent that the consumer is caught in a debt trap and cannot afford the loan applied for.

45. On the face of it, ABC appears to merely follow a “tick box exercise”, to create the impression of complying with the NCA. It has a credit agreement; it has an affordability assessment document. It ostensibly accessed credit bureau information, it has a bank statement. However, when one delves into the actual detail, it is clear that ABC did not comply with the reasonable assessment requirement in terms of section 81. Further, ABC did not conduct a new affordability assessment. It simply used an assessment and payslip from the original loan application two years prior.

46. ABC can further not rely on the protections afforded by Section 81(4)[6] of the NCA. The consumer was not requested to complete a new affordability assessment. Even if he had, ABC would have immediately

seen that the expenses information provided by the consumer did not match the information available on the credit bureau report and the bank statement. The credit provider cannot simply rely on false income and expenditure information provided by the consumer if it is clearly contradicted by the other information available.

47. This pattern identified above is similar for all 10 of the sampled credit agreements on the file. The ostensible disposable income available is always clearly contradicted by the credit bureau report and the bank statement attached. For example, on page 111 is the bank statement of “VNRS”. His salary is paid on the 14th of every month, three days later, by the 17th, his account balance is depleted. His account further shows deductions from Wonga. This deduction is not reflected anywhere in his expenses form. No credit provider, taking the reasonable steps as outlined in Section 81 and the Regulations, would have granted the loans.

CONCLUSION ON THE EVIDENCE

48. Based on the evidence, the Tribunal finds that ABC repeatedly engaged in prohibited conduct by contravening the following sections

of the NCA –

48.1 Section 52(5)(f) of the NCA read with Regulations 62 to 68. Failing to submit the prescribed information to the NCR;

48.2 Section 81(2)(a) of the NCA. Failing to conduct proper affordability assessments; and

48.3 Section 100(1) read with section 101(1) of the NCA. Charging fees and interest in excess of the maximum permitted.

49. ABC did not conduct proper affordability assessments for the ten sampled credit agreements in the matter. In accordance with Section 83[7] of the NCA, the Tribunal declares these agreements as reckless. The consequences of this declaration depend on the specific section that ABC contravened.

50. The agreements did reveal a bare form of assessment that had been done. There is no evidence before the Tribunal as to whether the consumers understood the risk and costs associated with the credit agreements. Therefore the Tribunal must find that ABC contravened Section 80(1)(b)(ii). The unfortunate provisions of Section 83(3)[8] therefore apply[9]. The Tribunal was not provided with any information regarding the current financial circumstances of these consumers. The Tribunal is therefore unable to make any order in terms of this section. The NCR is at liberty to advise these consumers that they may approach a debt counsellor for assistance. The debt counsellor may place all the relevant information before the Tribunal, to enable the consideration of an order under Section 83(3).

SANCTIONS

51. As ABC has been found to have engaged in repeated prohibited conduct, it follows that the appropriate sanctions must be considered.

Deregistration

52. The NCR has requested that ABC be deregistered as a credit provider. The Tribunal will not lightly order deregistration, especially for a credit provider that has been registered for a long time. Although the charges against ABC are serious, they do not justify deregistration at this time. ABC can possibly improve its processes to ensure it now complies with the NCA.

Interdict

53. As ABC will continue to operate as a credit provider, an interdict is not warranted.

Administrative fine

54. The NCR requested that the Tribunal impose a fine on Cash Express and made submissions on the factors to be considered in terms of

section 151(3) of the NCA.

55. It is clear that ABC has benefitted financially from its unlawful operations. Credit providers cannot be perceived as benefitting

financially from contravening the NCA for as long as they can until they are caught. A strong message must again be sent that contravening the NCA will result in their unlawful financial rewards being forfeited. A fine will, therefore, be imposed in this instance. The NCR did not submit any financial information for ABC, the maximum fine that the Tribunal can consider in this matter is R1 000 000.00.

56. The following factors will be considered when imposing the fine –

56.1 Nature, duration, gravity and extent of the contraventions

Based on the evidence presented, ABC has been registered since 2007. The reckless lending contraventions only date from 2018 but based on the credit bureau report information mentioned it might have started from 2016 at least. Reckless lending is a serious contravention of the NCA. By not doing proper affordability assessments ABC has placed consumers at severe risk of over-indebtedness;

The consumers in this matter appear to be caught in a debt trap from which they will never escape. The implications are very serious for these consumers;

56.2 Loss or damage suffered as a result of the contravention

Consumers who receive loans they cannot afford places them in very difficult situations that can have far-reaching consequences for their families;

The consumers in this matter have been paying excess fees they can ill afford;

56.3 The behaviour of the respondent

ABC cooperated with the NCR during the initial investigation. However, after that it appears ABC decided to defend and argue the matter at all costs, despite admitting to various contraventions of the NCA;

56.4 The market circumstances in which the contravention took place

Consumers remain under severe financial pressure. The fact that so many consumers are overindebted and yet still apply for loans is an indication of the level of desperation that exists;

56.5 The level of profit derived from the contravention

No specific evidence was submitted in this regard. ABC admitted that it did not submit any returns to the NCR;

It, however, appears that ABC has several branches owned by the same member. It has further been in operation since 2007; this is an indication that ABC enjoys a very substantial income from its activities as a credit provider;

56.6 The degree to which the respondent has co-operated with the National Credit Regulator

The factors being considered in this regard are similar to those in paragraph 55.3 above; and

56.7 Whether the respondent has previously been found in contravention of this Act.

The NCR did not submit any evidence of any prior contraventions.

57. The Tribunal considered all the above factors. The Tribunal finds that an administrative fine of R300 000.00 (three hundred

thousand Rand) is appropriate under the circumstances.

Independent audit

58. The NCR requested that the Tribunal order an independent audit of all the credit agreements to determine instances of overcharging of interest fees.

59. The Tribunal regards the audit as justified in this matter. Consumers who were overcharged must be reimbursed by ABC.

60. The NCR requested that the auditor appointed by ABC must be approved by the NCR. In the Tribunal’s view, this request may lead to allegations of bias and undue preference in the appointing of an auditor.

61. The overall aim would be to ensure that the auditor appointed conducts the audit process properly and efficiently. This aim can reasonably be achieved by requiring that the auditor is registered as a Chartered Accountant.

ORDER

62. Accordingly, the Tribunal makes the following order:

62.1 The Respondent is found to have engaged in repeated prohibited conduct;

62.2 The Respondent is to pay an amount of R300 000.00 (three hundred thousand) to the National Revenue Fund within 60 business days of the date of issuing of this judgment. The National Revenue fund account details are as follows;

Bank -

Standard Bank of South Africa

Account name -

Department of Trade and Industry

Account number - 370650026

Account type -

Business current account

Branch code -

010645 (Sunnyside)

Branch code

for electronic payments - 051001

Reference - NCT/127619.2019/57 (Name of the depositor); and

62.3 The Respondent is to appoint an independent auditor (who is registered as a Chartered Accountant) at its own costs within 30 business days of the date of issuing of this judgment. The auditor is to assess all credit agreements entered into by ABC within the last three years from the date of issuing of the judgment. The auditor must assess whether the interest fees and charges on all the credit agreements were correctly calculated as per the NCA. Only the credit agreements entered into in the last three years from the date of this judgment must be assessed. Overpaid fees and charges must be reimbursed to the relevant consumers. The audit is to be completed within 90 business days after the auditor has been appointed. The auditor must provide a final report in this regard to the NCR within 120 business days after being appointed; and

62.4 There is no order as to costs.

DATED ON THIS 24TH DAY OF SEPTEMBER 2019

[signed]

Adv J Simpson

Presiding Tribunal member

Prof T Woker (Tribunal member) and Adv F Manamela (Tribunal member) concurring.

[1] General Conditions of Registration document. Page 38

[2] Annexure D5 to the founding affidavit

[3] “(5) Any fact or allegation in the application or referral not specifically denied or admitted in an answering affidavit, will be deemed to have been admitted.”

[4] GN 789 of 28 August 2007: Regulations for matters relating to the functions of the Tribunal and Rules for the conduct of matters

before the National Consumer Tribunal, 2007 (Government Gazette No. 30225) as amended by Notice Government Gazette Date GN 428 34405 29 June 2011 GNR.203 38557 13 March 2015

[4] GN 789 of 28 August 2007: Regulations for matters relating to the functions of the Tribunal and Rules for the conduct of matters

before the National Consumer Tribunal, 2007 (Government Gazette No. 30225)

as amended by Notice Government Gazette Date GN 428 34405 29 June 2011 GNR.203 38557 13 March 2015

[5] GNR.489 of 31 May 2006: Regulations made in terms of the National Credit Act, 2005 as amended by Notice

Government Gazette Date GNR.1209 29442 30 November 2006 GNR.604 30713 29 May 2008 GNR.202 38557 13 March 2015 w.e.f. 13 September 2015*

[5] GNR.489 of 31 May 2006: Regulations made in terms of the National Credit Act, 2005

as amended by

Notice

Government Gazette Date

GNR.1209 29442 30 November 2006

GNR.604 30713 29 May 2008

GNR.202 38557 13 March 2015 w.e.f. 13 September 2015*

[6] “(4) For all purposes of this Act, it is a complete defence to an allegation that a credit agreement is reckless if (a) the credit provider establishes that the consumer failed to fully and truthfully answer any requests for information made by the credit provider as part of the assessment required by this section; and (b) a court or the Tribunal determines that the consumer’s failure to do so materially affected the ability of the credit provider to make a proper assessment.”

[6] “(4) For all purposes of this Act, it is a complete defence to an allegation that a credit agreement is reckless if

(a) the credit provider establishes that the consumer failed to fully and truthfully answer any requests for information made by the credit provider as part of the assessment required by this section; and

(b) a court or the Tribunal determines that the consumer’s failure to do so materially affected the ability of the credit provider to make a proper assessment.”

[7]“83. Declaration of reckless credit agreement.—(1) Despite any provision of law or agreement to the contrary, in any court or Tribunal proceedings in which a credit agreement is being considered, the court or Tribunal, as the case may be, may declare that the credit agreement is reckless, as determined in accordance with this Part.”

[8] “(3) If a court or Tribunal, as the case may be, declares that a credit agreement is reckless in terms of section 80 (1) (b) (ii), the court or Tribunal, as the case may be— (a) must further consider whether the consumer is overindebted at the time of those proceedings; and (b) if the court or Tribunal, as the case may be, concludes that the consumer is overindebted, the said court or Tribunal may make an order— (i) suspending the force and effect of that credit agreement until a date determined by the Court when making the order of suspension; and (ii) restructuring the consumer’s obligations under any other credit agreements, in accordance with section 87. (4) Before making an order in terms of subsection (3), the court or Tribunal, as the case may be, must consider— (a) the consumer’s current means and ability to pay the consumer’s current financial obligations that existed at the time the agreement was made; and (b) the expected date when any such obligation under a credit agreement will be fully satisfied, assuming the consumer makes all required payments in accordance with any proposed order.

[8] “(3) If a court or Tribunal, as the case may be, declares that a credit agreement is reckless in terms of section 80 (1) (b) (ii), the court or Tribunal, as the case may be—

(a) must further consider whether the consumer is overindebted at the time of those proceedings; and

(b) if the court or Tribunal, as the case may be, concludes that the consumer is overindebted, the said

court or Tribunal may make an order—

(i) suspending the force and effect of that credit agreement until a date determined by the Court when making the order of suspension; and

(ii) restructuring the consumer’s obligations under any other credit agreements, in accordance with section 87.

(4) Before making an order in terms of subsection (3), the court or Tribunal, as the case may be, must consider—

(a) the consumer’s current means and ability to pay the consumer’s current financial obligations that

existed at the time the agreement was made; and

(b) the expected date when any such obligation under a credit agreement will be fully satisfied, assuming the consumer makes all required payments in accordance with any proposed order.

[9] The writer must just note in passing that the provisions of Section 83(3) have been found to be highly impractical and unhelpful in assisting consumers. In the writer’s view the NCA can be amended to delete the distinction made between sections 80(1)(b)(i)

and 80(1)(b)(ii). Alternatively the section should provide for a more logical and practical manner of assisting consumers in these instances.