National Credit Regulator v Fast Cash Micro Finance CC (NCT/157215/2020-57(1)) [2021] ZANCT 2 (12 March 2021)

IN THE NATIONAL

CONSUMER TRIBUNAL

HELD IN CENTURION

Case Number: NCT/157215/2020-57(1)

In the matter between:

NATIONAL CREDIT

REGULATOR

APPLICANT

AND

FAST CASH MICRO

FINANCE CC

RESPONDENT

Coram:

Mr F Sibanda - Presiding Tribunal member

Dr MC Peenze - Tribunal member

Prof B Dumisa - Tribunal member

Date of hearing - 12 March 2021

JUDGMENT AND

ORDER

APPLICANT

1. The Applicant in this matter is the National Credit Regulator ("the NCR"), a juristic person established in terms of section 12 of the National Credit Act ("the NCA" or "the Act").[1] At the hearing, Mr Roy Stocker, the Applicant's Senior Legal Advisor: Investigations and Enforcement, represented the Applicant.

RESPONDENT

2. The Respondent is Cash Micro Finance CC, a closed corporation duly incorporated and registered in terms of the Republic of South Africa's company laws. The Respondent is registered with the Applicant as a credit provider.

3. The Respondent did not file an answering affidavit, and the matter had been set down on an unopposed basis.

4. At the hearing, the Respondent was represented by Mr Jandrie Roux from Roux attorneys.

TYPE OF

APPLICATION AND JURISDICTION

5. In this application, the Applicant seeks cancellation of the Respondent's registration with the Applicant.

6. In terms of section 27 of the National Credit Act 2005 ("the Act" or "NCA"), the National Consumer Tribunal (Tribunal) has jurisdiction.[2]

INTRODUCTION AND

CONSIDERATION OF EVIDENCE ON A DEFAULT BASIS

7. On 19 March 2020, the Applicant served the application on the Respondent by email. The Applicant consented to be served by email on 17 March 2020.

8. The Applicant filed the application with the Tribunal's Registrar ("Registrar") on 19 March 2020. On 20 March 2020, the Registrar issued a notice of filing and served it on the Applicant and Respondent by email.

9. In terms of Rule 13 (2) of the Regulations for matters relating to the functions of the Tribunal and Rules for the Conduct of matters before the Tribunal ("the Tribunal Rules"),[3] the Respondent had 15 business days after being served with the application, to serve an answering affidavit on the Applicant.[4] The Respondent did not file an answering affidavit or opposing papers.

10. On 08 October 2020, after the closure of pleadings, the Registrar issued a Notice of Set Down for the matter to be heard on 6 April

2021 and served the same on the parties by email. On 29 January 2021, the Registrar issued a revised Notice of Set Down, changing the hearing's date for the matter to be heard on 12 March 2021. The Registrar served the same on the parties by email.

11. The matter was set down for hearing on a default basis because the Respondent did not file any answering affidavit. However, on the day of the hearing, the Respondent's legal representative appeared without prior information or notification to Tribunal members. The Respondent's legal representative motivated his presence, explaining that the Respondent filed opposing papers and an application for condonation the previous day, on 11 March 2021. The legal representative further explained that he would like to request a postponement of the matter to enable the Respondent's condonation application to be heard.

12. The Tribunal decided to hear both parties on the Respondent's request for a postponement.

13. The Respondent's legal representative confirmed that the Respondent received the Application to the Tribunal and other Tribunal documents but submitted that the Respondent only instructed legal counsel the week of the hearing's set-down date. The Respondent's legal representative further explained that the matter is complex and that the Respondent did not understand the processes of the National Consumer Tribunal ("the NCT" or "the Tribunal"). The Respondent further argued that it would suffer prejudice should it not be offered an opportunity to oppose the main matter.

14. The Applicant opposed the request for postponement, outlining that the Respondent was aware of the obligation to file an answering affidavit for over a year. The Applicant cautioned the Tribunal about an abuse of process. He acknowledged that it might be in the interest of fairness to hear the Respondent but argued that consumers would suffer prejudice if the Tribunal postponed the matter.

15. Having listened to both parties, the Tribunal noted that the Respondent was represented by an attorney who should be aware of the Tribunal Rules. The Tribunal panel confirmed that it was satisfied that there was proper service of all pleadings. The Respondent was also adequately notified of the date, time and venue of the proceedings.

16. Whilst the Tribunal has the discretion to grant a postponement, good and sound reasons should be provided for a postponement. The Tribunal found the Respondent's argument vague and unconvincing.

17. Despite having had ample time to file an answering affidavit or condonation application, the Respondent did not do so until the day before the hearing. The Respondent also did not file a postponement application in terms of the Tribunal Rules but merely turned up on the hearing's date to request a postponement.[5]

18. The panel found the Respondent's explanation, namely that it did not process any opposing papers due to its failure to understand the process of the Tribunal, as unsatisfactory. The Tribunal believed the Respondent attempted to take advantage of regulatory bodies by claiming ignorance, especially since the Respondent had been in operation as a credit provider for thirteen years. Further, the Tribunal communicated clearly to the Respondent what its responsibilities were and the timeframes applicable to oppose the matter. The Respondent had enough time to consider and file its condonation application and answering affidavit over the last year but chose not to do so.

19. The Tribunal also considered the consequent impact on consumers if the matter would be further delayed. Section 142 of the NCA provides that the Tribunal must hear its matters as expeditiously as possible.

20. As the Tribunal could not find a basis for postponing the matter, it ordered that it continue on a default basis, satisfied that the Respondent was duly served with the application as required in terms of Rule 25 (3) of the Tribunal Rules. Subsequently, the legal representative of the Respondent excused himself from the hearing. The hearing proceeded in the absence of the Respondent in terms of Rule 24 of the Tribunal Rules.[6]

21. To limit the risk of the Covid-19 transmission and to observe the physical distancing protocol, all the parties appeared via a ZOOM technology link.

FACTS

22. The Applicant's case is stated in its founding affidavit. The deponent is Anne-Carien du Plooy (Ms Du Plooy). Ms Du Plooy is an acting manageress in the Applicant's Investigations and Enforcement Department. According to Ms Du Plooy, the Respondent is registered as a credit provider with the Applicant under registration number NCRCP11794.

23. The referral to the Tribunal originates from a complaint initiated by the Applicant in terms of section 136 (2) of the NCA. The complaint emanates from the Serious Commercial Crimes Unit – Mahikeng, in the Directorate for Priority Crime Investigation (commonly known as the Hawks), regarding the Respondent's business practices. The information purported that the Respondent engaged in the following conduct:

23.1. Overcharging of interest on consumer credits; and

23.2. Failure to conduct affordability assessments leading to reckless credit and over-indebtedness of consumers.

As a result of the information, the Applicant formed a reasonable suspicion that the Respondent was engaged in prohibited conduct.

24. On 15 August 2019, the Applicant's Chief Executive Officer appointed Douglas Musandiwa ("Musandiwa") and Tshepo Mahobye ("Mahobye") as inspectors for purposes of investigating the Respondent's business practices. On 20 August 2019, the inspectors visited the Respondent's principal place of business in Mahikeng.

25. During the course of the investigation, Musandiwa interviewed Mr Kobus Bergsma ("Bergsma"), who introduced himself as a manager of the Respondent. Musandiwa randomly selected and copied ten consumer files with the consent of Bergsma. He assessed the selected files and compiled an investigation report. The investigation report was attached to the Applicant's founding affidavit. Copies of the sampled files were annexed to the investigation report and marked "FA5".

26. Based on Musandiwa's investigation report and annexed documentary evidence, the Applicant alleges that the Respondent contravened the following provisions of the NCA:

26.1. Section 81 (1) (a) (ii) and (iii) of the NCA, read with regulation 23, in that the Respondent failed to take reasonable steps to assess the debt re-payment history of the consumer under credit agreements as well as the consumer's existing financial means, prospects and obligations;

26.2. Section 81 (3) of the NCA, read together with Section 80 (1) (a), in that the Respondent has extended credit recklessly to consumers;

26.3. Section 81 (3) of the NCA, read together with Section 80 (1) (b) (ii) of the NCA, in that the preponderance of information available

to the Respondent at the time the credit agreements were entered into, indicated that entering into those credit agreements would make the consumers over-indebted;

26.4. Section 106 (8) of the NCA, read with Regulation 3 (1) of the Credit Life Insurance Regulations, in that the Respondent levied credit life insurance on credit agreements in an amount exceeding the maximum allowable amount per life insured;

26.5. Section 101 (1) (c) (iii) and 105 (1) (b) of the NCA, read with Regulation 44 of the NCA, in that the Respondent imposed upon consumers the “ALLPS Promissory Note” fee, payable to Information Technology Consultants (Pty) Ltd (“Intecon”), leading to overcharging of services; and

26.6. Regulation 64 and 66 of the NCA, as well a Section 52 (5) (c) of the NCA, read with condition A3 of the Respondent's conditions of

registration as a credit provider, in that the Respondent has consistently failed since 2007 to submit an annual financial and

operational return (Form 40) to the Applicant, and also failed between 2015 to 2019 to submit a statistical return (Form 39) to the Applicant.

27. During the hearing on 12 March 2021, the Applicant abandoned its arguments in paragraphs 8, 9 and 10 of its Founding Affidavit and updated its prayers accordingly.

APPLICANTS

PRAYERS

28. The Applicant seeks an order cancelling the Respondent's registration as a credit provider with the Applicant in terms of section 150 (g) read with section 57 (2) and (3) of the NCA.

29. The Applicant further seeks an order declaring that the Respondent's repeated contraventions of the provisions of the NCA constitute prohibited conduct in terms of section 150 (a) of the NCA, interdicting the Respondent from future breaches of the NCA, and imposing an administrative fine upon the Respondent in the amount of R1 Million or 10% of the Respondent's annual turnover, whichever is

greater;

30. Also, the Applicant seeks to declare the Respondent's credit agreements with consumers as reckless in terms of Section 80 (1) (a)

of the NCT and: -

30.1. Requests the setting aside of all the consumer's obligations under those agreements; and

30.2. Requests the Respondent to be ordered to, at its own costs: -

30.2.1. Refund all the cost of credit charged and recovered from consumers under all such agreements;

30.2.2. Refrain from taking any enforcement action against such consumers and, to the extent that the Respondent may already have taken enforcement action which is pending against any such consumers, the Respondent shall formally withdraw such action, and tender payment of the consumer's legal costs where the action is defended or opposed; and

30.2.3. Take all such steps as may be necessary to ensure that: -

(i) Any adverse credit bureau records which may have arisen as a result

of the consumer having concluded such credit agreements with the Respondent are removed; and

(ii) Any civil judgments taken by the Respondent against such consumers regarding such agreements are rescinded or, if rescission is not possible, abandoned.

31. Further to the above, the Applicant wants the Respondent to be ordered to:

31.1. Within 30 days, appoint an independent auditor at its own cost, whose appointment shall be subject to the prior written approval of the Applicant, to identify all credit agreements concluded by the Respondent in the past 3 (three) years to determine if any consumers were overcharged on interest and/or service fees (including Promissory fees paid under the ALLPS Promissory Note agreements)

and/or initiation fees and/or credit life insurance premiums, and provide a list of such consumers as well as the amount by which each such consumer was overcharged;

31.2. Once the auditor mentioned above has compiled the abovementioned report, within 30 days from the date of the auditor's report: -

(i) Refund the consumers all amounts which exceeded the prescribed maximum amounts allowed by the Act;

(ii) Refrain from taking any enforcement action against all such consumers who were overcharged as identified in the audit report and,

to the extent that the Respondent may already have taken enforcement action which is pending against any such consumers, the Respondent

shall formally withdraw such action, and tender payment of the consumer's legal costs where the action is defended or opposed;

31.3. Once the refunds have been made as stated above, provide the auditor's report and a written report to the Applicant detailing the

consumers' identity, the refund made, and the further steps taken. These reports are to be provided to the Applicant within 120 days after the Tribunal order has been obtained; and

31.4. Appoint an independent auditor to determine and compile a list of all the consumers who were charged fees that exceeded the prescribed

maximums and by which amounts the Respondent has overcharged these consumers. Once the auditor has compiled the list, the Respondent

must refund the amounts to each consumer. Once the refunds have been made, the Respondent must provide a written report to the Applicant detailing the identity of consumers and the refunds made.

32. In its papers, the Applicant also sought an order compelling the appointed auditor to identify all credit agreements which the Respondent entered into without properly conducting assessments in terms of the NCA; and, once so identified, declare those agreements as reckless in terms of Section 80 (1) (a) of the Act. During the hearing, the Applicant acknowledged that this prayer is not allowed

in terms of the Act or the law. The Applicant subsequently abandoned this prayer.

33. The last prayer that the Applicant seeks is further, or alternative relief as the Tribunal may consider appropriate to give effect to the consumers' rights under the NCA as per section 150 (i) thereof.

PENALTY

34. As motivation for the appropriate penalty, the Applicant submits as follows:

Nature, duration, gravity and extent of the contraventions

34.1. Having regard to the small sample of files extracted and the contraventions of the NCA identified from these sampled files, the nature and extent of the contraventions warrant serious action against the Respondent.

34.2. In every single transaction sampled, the Respondent breached its obligations in terms of the Act. This illustrates the Respondent's

disregard for rules and norms of the regulated activity which the Applicant undertakes.

34.3. The Respondent's failure to assess consumers' affordability and adhere to the NCA indicates a complete disregard for the consumers'

rights and the industry within which the Respondent conducts business.

Loss or damage suffered as a result of the contraventions

34.4. Consumers have suffered losses and have been exploited by the Respondent, which entered into loan agreements with them without the

Respondent first taking reasonable steps to ensure that the loans are affordable to the consumers.

34.5. The lack of proper affordability assessments results in reckless credit being granted. The damage to a consumer's economic status is far-reaching if they, due to over-indebtedness, apply for and are placed under debt review.

34.6. Consumers suffered a loss due to the unlawful conduct of the Respondent.

The behaviour of the Respondent

34.7. There is no plausible reason for the Respondent to be unaware of its statutory obligation to adhere to the Act's provisions. The

Respondent is a registered credit provider, indicating that the Respondent is aware of the NCA's prescripts.

Market circumstances under which the contraventions occurred

34.8. The Respondent's conduct illustrates that the market circumstances within which the contraventions occurred are such in which consumers are uneducated about their rights relating to access to credit.

Level of profit derived from contraventions

34.9. The Respondent has derived a substantial profit from its activities. The Applicant is unable to provide specific detail as to the turnover or profits made by the Respondent, but submitted that the Tribunal could order the Respondent to provide copies of its

management accounts and audited financial statements over the relevant period to determine the relevant profit. The Respondent also submitted that, even in the absence of such information, the Tribunal is still empowered to impose an administrative fine of up to R1 million on the Respondent.

Degree of co-operation between the Respondent and Applicant

34.10. The Respondent co-operated with the Applicant during the course of the investigation.

Prior contraventions committed by the Respondent

34.11. There are no prior investigations or enforcement action instituted by the Applicant against the Respondent. However, the contraventions' nature and duration indicate that the Respondent's conduct has been ongoing before the investigation.

35. The Applicant submitted that having regard to the foregoing factors and gravity of the contraventions perpetuated by the Respondent, the Applicant wants the Tribunal to impose an administrative fine on the Respondent.

ISSUES TO BE

DECIDED

36. The issues to be decided include whether the Respondent repeatedly contravened the NCA provisions as alleged by the Applicant. If so, whether the Respondent's registration with the Applicant should be cancelled, whether an administrative fine should be imposed on the Respondent, and the amount of the administrative fine, if any.

THE LAW

37. To avoid prolixity, only those provisions of the main statute, the NCA, and the provisions of Regulation 55 (1) (b) (vi) of the NCA

regulations that the Applicant relies on will be stated hereunder. Also, the provisions of Rule 13 (5) of the Tribunal Rules will be stated.

38. Section 3 (e) (ii) of the NCA states-

"The purposes of this Act are to promote and advance the social and economic welfare of South Africans, promote a fair, transparent,

competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers, by addressing and correcting imbalances in negotiating power between consumers and credit providers by providing consumers with adequate disclosure of standardised information in order to make informed choices."

39. Section 57 (1) of the NCA states-

“Subject to subsection (2), a registration in terms of this Act may be cancelled by the Tribunal on request by the National Credit Regulator, if the registrant repeatedly-

(a) fails to comply with any condition of its registration;

(b) fails to meet a commitment contemplated in section 48 (1); or

(c) contravenes this Act.”

40. Section 57 (2) of the NCA states-

"In any circumstance contemplated in subsection (1) concerning a registrant that is a registered financial institution, the National Credit Regulator may-

(a) impose conditions on the registration of that person, consistent with its licence;

(b) refer the matter to the regulatory authority that licensed that regulated financial institution, with a request that the regulatory authority review that licence in the circumstances; or

(c) at the request, or with the consent, of the regulatory authority that licensed that regulated financial institution, request the Tribunal to cancel the registration."

41. Section 57 (3) of the NCA states-

"A regulatory authority to whom a matter is or may be referred in terms of subsection (2) (b) -

(a) must conduct a formal review of the registrant's licence;

(b) to the extent permitted by the legislation in terms of which the registrant is licensed, may suspend that licence pending the outcome of that review; and

(c) may request, or consent to, the National Credit Regulator filing a request with the Tribunal as contemplated in subsection (2) (c)."

42. Section 80 (1) of the NCA states-

"A credit agreement is reckless if, at the time that the agreement was made, or at the time when the amount approved in terms of the agreement is increased, other than an increase in terms of section 119 (4)-

(a) the credit provider failed to conduct an assessment as required by section 81 (2), irrespective of what the outcome of such an assessment might have concluded at the time.

(b) the credit provider, having conducted an assessment as required by section 81 (2), entered into the credit agreement with the consumer despite the fact that the preponderance of information available to the credit provider indicated that -

(i) the consumer did not generally understand or appreciate the consumer's risks, costs or obligations under the proposed credit agreement; or

(ii) entering into that credit agreement would make that consumer over-indebted."

43. Section 81 (2) of the NCA states-

"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 re-payment 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."

44. Section 81 (3) of the NCA states-

"A credit provider must not enter into a reckless credit agreement with a prospective consumer."

45. Section 90 (2) (k) (iii) of the NCA states-

"A provision of a credit agreement is unlawful if it expresses, on behalf of the consumer an undertaking to sign in advance any documentation relating to enforcement of the agreement, irrespective of whether such documentation is complete or incomplete at the time it is signed."

46. Section 92 (1) of the NCA states-

"A credit provider must not enter into a small credit agreement unless the credit provider has given the consumer a pre-agreement statement and quotation in the prescribed form."

47. Section 93 (2) of the NCA states that "A document that records a small credit agreement must be in the prescribed form."

48. Section 101 of the NCA states-

"(1) A credit agreement must not require payment by the consumer of any money or other consideration, except-

(a) the principal debt, being the amount deferred in terms of the agreement, plus the value of any item contemplated in section 102;

(b) an initiation fee, which-

(i) may not exceed the prescribed amount relative to the principal debt; and

(ii) must not be applied unless the application results in the establishment of a credit agreement with that consumer;

(c) a service fee, which-

(i) in the case of a credit facility, may be payable monthly, annually, on a per transaction basis or on a combination of periodic and transaction basis; or

(ii) in any other case, may be payable monthly or annually; and

(iii) must not exceed the prescribed amount relative to the principal debt;

(d) interest which-

(i) must be expressed in percentage terms as an annual rate calculated in the 25 prescribed manner; and

(ii) must not exceed the applicable maximum prescribed rate determined in terms of section 105;

(e) cost of any credit insurance provided in accordance with section 106;

(f) default administration charges, which-

(i) may not exceed the prescribed maximum for the category of credit agreement concerned; and

(ii) may be imposed only if the consumer has defaulted on a payment obligation under the credit agreement, and only to the extent permitted by Part C of Chapter 6; and

(g) collection costs, which may not exceed the prescribed maximum for the category of credit agreement concerned and may be imposed only to the extent permitted by Part C of Chapter 6.

(2) A credit provider who is a party to a credit agreement with a consumer and enters into a new credit agreement with the same consumer that replaces the earlier agreement in whole or in part may charge that consumer an initiation fee contemplated in subsection (I) (b) in respect of that second credit agreement, only to the extent permitted by regulation, having regard to the nature of the transaction and the character of the relationship between the credit provider and consumer.

(3) If a credit facility is attached to a financial services account, or is maintained in 45 association with such an account, any service charge in terms of that account-

(a) if that charge would not have been levied if there were no credit facility attached to the account, is subject to the prescribed maximum contemplated in subsection (1) (c); and

(b) otherwise, is exempt from the prescribed maximum contemplated in subsection (1) (c)."

49. Section 103 of the NCA states-

"(1) Subject to subsection (5), the interest rate applicable to an amount in default or an overdue payment under a credit agreement may not exceed the highest interest rate applicable to any part of the principal debt under that agreement.

(2) A credit agreement may provide for an interest charge to become payable or be debited at any time after the day to which it applies.

(3) A credit provider must not, at any time before the end of a day to which an interest charge applies, require payment of or debit the interest charge.

(4) A credit agreement may provide for the interest rate to vary during the term of the 40 agreement only if the variation is by fixed relationship to a reference rate stipulated in the agreement, which reference rate must be the same as that used by that credit provider in respect of any similar credit agreements currently being issued by it.

(5) Despite any provision of the common law or a credit agreement to the contrary, the amounts contemplated in section 101 (l) (b) to (g) that accrue during the time that a consumer is in default under the credit agreement may not, in aggregate, exceed the unpaid balance of the principal debt under that credit agreement as at the time that the default occurs.

(6) The Minister may make regulations prescribing the manner in which interest is to be calculated and disclosed for purposes of this Act.

(7) Subject to the review and approval of the National Credit Regulator, subsection (4) does not apply in respect of developmental credit agreements."

50. Section 150 (a) of the NCA states-

"In addition to its powers in terms of this Act, the Tribunal may make an appropriate order in relation to prohibited conduct or required conduct in terms of this Act, or the Consumer Protection Act, 2008, including declaring conduct to be prohibited conduct in terms of this Act."

51. Section 150 (g) of the NCA states-

"In addition to its powers in terms of this Act, the Tribunal may make an appropriate order in relation to prohibited conduct or required conduct in terms of this Act, or the Consumer Protection Act, 2008, including suspending or cancelling the registrant's registration, subject to section 57 (2) and (3)."

52. Section 150 (i) of the NCA states-

"In addition to its powers in terms of this Act, the Tribunal may make an appropriate order in relation to prohibited conduct or required conduct in terms of this Act, or the Consumer Protection Act, 2008, including any other appropriate order required to give effect to a right, as contemplated in this Act or the Consumer Protection Act, 2008."

53. Regulation 55 (1) (b) (vi) of the NCA Regulations states-

"In addition to any records that must be kept in terms of the Act, a registrant must maintain the following records relating to its registered activities, which records may be kept in an electronic format:

(a) …

(b) Credit Providers, in respect of each consumer:

(i) …

(vi) documentation in support of any steps taken in terms of section 81(2) of the Act."

54. Rule 13(5) of the Tribunal Rules states that "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."

ANALYSIS OF THE

EVIDENCE

55. From the contents of Ms Du Plooy's affidavit and the documentary evidence filed by the Applicant, it is evident that:

55.1. in contravention of section 80 (1) and 81 (2) of the NCA, the Respondent failed to take reasonable steps to assess the debt re-payment histories of consumers, to properly examine bank statements, to read and apply credit bureau reports available, or to obtain the most recent credit bureau reports for purposes of assessing prospective consumers' debt re-payment histories before entering into credit agreements with consumers;

55.2. in contravention of Regulation 55 (1) (b) (vi) of the NCA, the Respondent failed to retain copies of the credit bureau reports utilised to assess prospective consumers' debt re-payment histories before entering into credit agreements with the consumers;

55.3. in contravention of sections 101 and 103 of the NCA read with Regulation 23A of the NCA, the Respondent failed to disclose the full

cost of credit to consumers before entering into credit agreements with them;

55.4. in contravention with Regulation 64 (2) of the NCA, the Respondent failed to complete and submit a statistical return (Form 39) by 15 February each year. The Respondent last submitted a Form 39 in February 2014 for its activities for the 2013 calendar year,

meaning that it has failed to submit its Form 39 for all the years 2014 through to 2019;

55.5. in contravention with Regulation 66, the Respondent failed to complete and submit an annual financial and operational return (Form

40) to the Applicant within six months after the Respondent's financial year. The Respondent has not once, since its registration

in 2007, submitted a Form 40 to the Applicant; and

55.6. in contravention of section 93 (2) and Regulation 30 of the NCA, the Respondent failed to record small credit agreements with consumers in the prescribed Form 20.2.

56. Given the averments that Ms Du Plooy made in her affidavit, the documentary evidence annexed to the Applicant's founding affidavit, the Respondent's failure to adduce evidence refuting the Applicant's allegations, and the provisions of Rule 13 (5) of the Tribunal Rules, the Tribunal is satisfied that the Applicant has shown, on a balance of probabilities, that the Respondent breached its conditions of registration and repeatedly contravened the above-cited provisions of the NCA.

57. The Applicant has presented sufficient evidence for the Tribunal to declare that the Respondent repeatedly contravened various provisions of the NCA. As envisaged under section 150 (a) of the NCA, the Respondent's contravention of various NCA provisions constitutes prohibited conduct. Prohibited conduct is defined under section 1 of the NCA as "an act or omission in contravention of this Act other than an act or omission that constitutes an offence under this Act, by-

(a) an unregistered person who is required to be registered to engage in such an act; or

(b) a credit provider, credit bureau or debt counsellor."

58. Having found that the Respondent repeatedly contravened various provisions of the NCA, it follows that the Applicant has established a clear basis for the cancellation of Respondent's registration with the Applicant in terms of section 150 (g) of the NCA. In terms of section 150 (b) of the NCA, the Tribunal may make an order interdicting the Respondent from any further breaches of the NCA.

ADMINISTRATIVE

FINE

59. We now turn to the administrative fine that the Applicant wants to be imposed on the Respondent. In its application documents, the Applicant stated that it wants an administrative fine in the amount of R1 000 000.00 or 10% of the Respondent's annual turnover, whichever is the greater.

60. Per the provisions of section 151 (3) of the NCA, in determining the appropriate administrative fine, we will consider the following:

61. Nature: Reckless credit granting is one of the most egregious forms of prohibited conduct under the NCA. The Respondent exploited consumers. By extending credit without conducting proper affordability assessments, the Respondent acted in a manner that undermined the NCA's purpose and showed a callous disregard for consumers.

62. Duration: The evidence presented to the Tribunal shows that contraventions took place over many months.

63. Gravity: The Respondent's conduct shows a total disregard for the consumer protection measures provided for in the NCA and the regulated credit industry.

64. Extent: The fact that the Applicant found contraventions of the NCA in all the files its inspectors extracted from Respondent shows that the Respondent generally conducted its business illegally.

65. Although the actual loss has not been computed, the Applicant's evidence shows that consumers have suffered losses and/or damages due to the Respondent's conduct through the excessive costs of credit.

66. As a registered credit provider, the Respondent knew that it had to comply with the NCA's prescripts but chose to exploit consumers, nonetheless.

67. The Tribunal accepts the Applicant's submission that the Respondent's conduct illustrates that the market circumstances within which the contraventions occurred are those in which consumers are not educated of their rights relating to access to credit. The Tribunal views the exploitation of vulnerable consumers with contempt.

68. The Applicant was unable to state what the total amount of profit was.

69. The Respondent co-operated with the Applicant's inspector.

70. There are no prior investigations or enforcement action instituted by the Applicant against the Respondent. However, the Tribunal takes a very dim view of the fact that the Respondent has been found guilty of contravening numerous provisions of NCA.

71. In The Competition Commission of South Africa v Federal-Mogul Aftermarket Southern Africa (Pty) Ltd & Others[7] (Federal-Mogul case), the Competition Tribunal held that deterrence is the primary purpose of imposing administrative penalties.[8] The Competition Tribunal further said, "the deterrence element must have some relationship to the harm inflicted by the prohibited practice."

CONCLUSION

72. Based on the evidence presented to it, the Tribunal finds that the Respondent repeatedly contravened the following provisions of the NCA:

72.1. Sections 81 (2) (a) (ii) and (iii) read with Regulation 23A;

72.2. Section 81 (3) read together with Section 80 (1) (a);

72.3. Section 81 (3) read together with Section 80 (1) (b) (ii);

72.4. Section 106 (8) read with Regulation 3 (1) of the Credit Life Insurance Regulations;

72.5. Sections 101 (1) (c) (iii) and 105 (1) (b) and Regulation 44 of the Act; and

72.6. Regulation 64 and 66 and Section 52 (5) (c) read with condition A3 of its registration conditions as a credit provider.

73. The Respondent's conduct stated in paragraphs 54 to 56 above constitutes prohibited conduct. The Respondent's repeated and numerous contraventions of the provisions of the NCA conclusively demonstrate that the Respondent is a danger to the public and should be interdicted from future breaches of the NCA. Further, its registration with the NCR should be cancelled with immediate effect.

74. Having found that, in all the sampled files, the Respondent failed to conduct proper affordability assessments as envisaged in section 80 (1) (a) of the NCA, the Tribunal declares that all the credit agreements contained in the sampled files reckless. In terms of section 83 (2) (a) read with the provisions of section 150 (i) of the NCA, the Tribunal finds that it is just and reasonable to set aside consumers' obligations to pay the cost of credit in respect of the credit agreements contained in annexures "E1" to "E10" of the Applicant's founding affidavit.

75. On a conspectus of the evidence tendered by the Applicant, the Tribunal is of the view that the Respondent's disdain for the law that is meant to protect consumers and its callous treatment of consumers warrants the imposition of an administrative fine in the amount of R50 000.00 (fifty thousand Rand).

76. The Tribunal believes it is imperative to appoint an independent auditor, within 30 days, at the Respondent's own cost, who must determine and compile a list of all the consumers who were charged fees that exceeded the prescribed maximums, and by which amounts the Respondent has overcharged these consumers. Once the auditor has compiled the list, the Respondent must refund the amounts to each consumer within 30 days from the date of the auditor's report. Once the refunds have been made, the Respondent must provide a written report to the Applicant detailing consumers' identity and the refunds made. This report must be provided to the Applicant within 120 days after the order is made.

ORDER

77. The Tribunal makes the following order: -

77.1. The Respondent is found guilty of repeatedly contravening the following provisions of the NCA:

77.1.1. Sections 81 (2) (a) (ii) and (iii) read with Regulation 23A;

77.1.2. Section 81 (3) read together with Section 80 (1) (a);

77.1.3. Section 81 (3) read together with Section 80 (1) (b) (ii);

77.1.4. Section 106 (8) read with Regulation 3 (1) of the Credit Life Insurance Regulations;

77.1.5. Sections 101 (1) (c) (iii) and 105 (1) (b) and Regulation 44 of the Act; and

77.1.6. Regulation 64 and 66 and Section 52 (5) (c) read with condition A3 of its registration conditions as a credit provider.

77.2. The Respondent's conduct stated in paragraphs 77.1.1 to 77.1.6 above is hereby declared prohibited conduct in terms of Section 150 (a) of the NCA.

77.3. The credit agreements entered into between the Respondent and the following consumers:

77.3.1. Addipah Dorah Mabooase,

77.3.2. Williams Nathan Tevan,

77.3.3. Shupinyane Goitsone Eva,

77.3.4. Magano Tsholo Samuel,

77.3.5. Mafulako Ntsokolo Frans,

77.3.6. Thukgwe Palesa Bremla,

77.3.7. Rabotai Salome Keikaitsemang,

77.3.8. Moloto Nthabiseng Lorraine,

77.3.9. Morobe Nozimana Sarah, and

77.3.10. Thobakgale Putswana Isaac;

are hereby declared reckless;

77.4. The obligations of the consumers mentioned in paragraph 77.3.1 to 77.3.10 above to pay the costs of credit are set aside.

77.5. The Respondent must refund to the consumers mentioned in paragraph 77.3.1 to 77.3.10 of this order all the costs of credit, including the interest amounts it charged these consumers within 30 (thirty) ordinary days from the date of issuing this order.

77.6. The Respondent must appoint an independent auditor, at its own costs, within 30 days of the issuing of this order who must identify all credit agreements concluded by the Respondent in the past 3 (three) years to determine if any consumers were overcharged on interest and/or service fees (including Promissory fees paid under the ALLPS Promissory Note agreements) and/or initiation fees and/or credit life insurance premiums, and provide a list of such consumers as well as the amount by which each

consumer was overcharged;

77.7. Once the auditor has compiled the aforementioned report, the Respondent must, within 30 (thirty) days from the date of the auditor’s report:

77.7.1. Refund the consumers all amount which exceeded the prescribed maximum amounts allowed by the Act;

77.7.2. Refrain from taking any enforcement action against such consumers and to the extent that the Respondent may already have taken enforcement action, which is pending against any such consumers, the Respondent shall formally withdraw such action, and tender payment of the consumer’s legal costs where the action is defended or opposed;

77.7.3. Take all such steps as may be necessary in order to ensure that:

(i) Any adverse credit bureau records which may have arisen as a result

of the consumer having been overcharged as identified in the auditor’s report, are removed; and

(ii) Any civil judgments taken by the Respondent against such consumers in respect of such overcharged amounts, are rescinded or, if recission is not possible, abandoned; and

77.7.4. Refund the excessive amounts to each consumer within 30 days from the date of the auditor's report;

77.8. Once the refunds have been made, the Respondent must provide a written report to the Applicant detailing the consumers' identities

and the refunds made. This report must be provided to the Applicant within 120 days after the order is made;

77.9. In terms of section 151 (5) of NCA, the Respondent must pay, within 60 (sixty) ordinary days of issuing this order, an administrative fine in the amount of R50 000.00 (Fifty Thousand Rand) into the following bank account:

Bank Name: Standard Bank

Account Holder: The Department of Trade and Industry

Account Number: 370650026

Account Type: Business Current Account

Branch: Sunnyside

Branch code: 010645

Branch Code (electronic payments): 051001; SWIFT Address: SBZA JJ

77.10. The Respondent's registration with the National Credit Regulator is cancelled in terms of Section 150 (g) of the NCA;

77.11. The Respondent is interdicted from any further breaches of the NCA;

77.12. The Respondent is prohibited from enforcing any credit agreement that was entered without proper affordability assessments having been done; and

77.13. There is no order made as to costs.

Thus, done and signed at Centurion on 15 March 2021.

{signed}

Dr MC Peenze

Tribunal Member

Mr F Sibanda (Presiding Tribunal Member) and Prof B Dumisa (Tribunal Member) concur.

[1] Act 34 of 2005 as amended. [2] Section 27(a)(i) of the NCA provides that: “The Tribunal or a member of the Tribunal acting alone in accordance with this Act or the Consumer Protection Act, 2008 may adjudicate in relation to any application that may be made to it in terms of this Act in respect of such an application.”

[1] Act 34 of 2005 as amended.

[2] Section 27(a)(i) of the NCA provides that: “The Tribunal or a member of the Tribunal acting alone in accordance with this Act or the Consumer Protection Act, 2008 may adjudicate in relation to any application that may be made to it in terms of this Act in respect of such an application.”

[3] Published under GN 789 in GG 30225 of 28 August 2007 as amended by General Notice 428 in Government. Gazette 34405 of June 2011 (published in terms of the Consumer Protection Act 88 of 2008). GN R203 in GG 38557 of 13 Marth 2015 and GN 157 in GG 39663 of 4 February 2016.

[4] Rule 13 of the Tribunal Rules states - “(1) Any Respondent to an application or referral to the Tribunal may oppose the application or referral by serving an answering affidavit on: (a) the Applicant; and (b) every other person on whom the application was served. (2) An answering affidavit to an application or referral other than an application for interim relief must be served on the parties and filed with the Registrar within 15 business days of the date of the application.” [5] Also see National Credit Regulator v Good Friends Cash Loans (Pty) Ltd (NCT-112957/2018/57(1)) [2018], whereby the Tribunal refused a postponement application and stated that the Respondent’s counsel should have been aware of the Tribunal Rules.

[4] Rule 13 of the Tribunal Rules states -

“(1) Any Respondent to an application or referral to the Tribunal may oppose the application or referral by serving an answering affidavit on:

(a) the Applicant; and

(b) every other person on whom the application was served.

(2) An answering affidavit to an application or referral other than an application for interim relief must be served on the parties and filed with the Registrar within 15 business days of the date of the application.”

[5] Also see National Credit Regulator v Good Friends Cash Loans (Pty) Ltd (NCT-112957/2018/57(1)) [2018], whereby the Tribunal refused a postponement application and stated that the Respondent’s counsel should have been aware of the Tribunal Rules.

[6] Rule 24 of the Tribunal Rules states- “(1) If a party to a matter fails to attend or be represented at any hearing or any proceedings, and that party— (a) is the applicant, the presiding member may dismiss the matter by issuing a written ruling; or (b) is not the applicant, the presiding member may— (i) continue with the proceedings in the absence of that party; or (ii) adjourn the hearing to a later date. (2) The Presiding member must be satisfied that the party had been properly notified of the date, time and venue of the proceedings, before making any decision in terms of subrule (1). (3) The Registrar must send a copy of the ruling to the parties.”

[6] Rule 24 of the Tribunal Rules states-

“(1) If a party to a matter fails to attend or be represented at any hearing or any proceedings, and that party—

(a) is the applicant, the presiding member may dismiss the matter by issuing a written ruling; or

(b) is not the applicant, the presiding member may—

(i) continue with the proceedings in the absence of that party; or

(ii) adjourn the hearing to a later date.

(2) The Presiding member must be satisfied that the party had been properly notified of the date, time and venue of the proceedings, before making any decision in terms of subrule (1).

(3) The Registrar must send a copy of the ruling to the parties.”

[7] Competition Tribunal Case number: Case Number: 08/CR/Mar01.

[8] At para 166.