National Credit Regulator v FC African Trading Enterprise Solutions (Pty) Ltd (NCT/267015/2023/57(1)) [2024] ZANCT 4 (16 January 2024)

SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN CENTURION

Case number: NCT/267015/2023/57(1)

In the matter between:

NATIONAL CREDIT REGULATOR

APPLICANT

and

FC AFRICAN TRADING ENTERPRISE SOLUTIONS (PTY) LTD

RESPONDENT

Coram:

Mr CJ Ntsoane - Presiding Tribunal Member

Dr A Potwana - Tribunal Member

Mr S Mbhele - Tribunal Member

Date of Hearing - 27 June 2023

JUDGMENT AND REASONS

THE PARTIES

1. The applicant is the National Credit Regulator (NCR), a juristic person established in terms of section 12 of the National Credit Act 34 of 2005 (NCA), with its physical address at 1[…] F[…] Road, R[…], M[…], Gauteng.

2. During the hearing, the applicant was represented by its Senior Legal Advisor, Mr Mboniseni Mathivha.

3. The respondent is FC African Trading Enterprise Solutions (Pty) Ltd, trading as Friendly Credit Service, a company duly registered in terms of the company laws of the Republic of South Africa with its physical address at 3[…] N[...] Street, K[…] C[…], K[…], N[…] 2[…]. The respondent is registered as a credit provider with the NCR under registration number NCRCP11517.

4. On the day of the hearing, there was no representative on behalf of the respondent.

APPLICATION TYPE AND JURISDICTION

5. This is an application in terms of section 57(1) of the NCA for the cancellation of the respondent’s registration as a credit

provider allegedly due to its repeated failure to comply with its conditions of registration and repeated contraventions of the

provisions of the NCA. 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.”

6. Section 27(a) of the NCA states –

“The Tribunal or a member of the Tribunal acting alone in accordance with this Act or the Consumer Protection Act, 2008, may-

(a) adjudicate in relation to any-

(i) application that may be made to it in terms of this Act, and make any order provided for in this Act in respect of such an application; or

(ii) allegations of prohibited conduct by determining whether prohibited conduct has occurred and, if so, by imposing a remedy provided for in this Act.”

7. Accordingly, in terms of section 27(a) of the NCA, the Tribunal has jurisdiction to hear this matter.

BACKGROUND

8. On 3 April 2023, the applicant filed an application to cancel the respondent’s registration with the applicant in terms of section 57(1) of the NCA with the Tribunal’s Registrar (Registrar). The application documents were served on the respondent by registered mail on 31 March 2023.

9. The applicant alleges that the respondent contravened the following sections of the NCA:

9.1. Section 81(2)(a)(ii) and (iii) read with regulation 23A,

9.2. Section 81(3) read with section 80(1)(a), okay

9.3. Section 81(3) read with section 80(1)(b)(ii),

9.4. Section 170 read with regulation 55(1)(b)(vi),

9.5. Section 92(1) read with regulation 28(1)(b) and Form 20,

9.6. Section 93(1) and (2) read with regulation 30(1) and Form 20.2,

9.7. Section 100(1)(c) and 101(1)(d)(ii) read with regulation 42(1),

9.8. Section 100(1)(b) and 101(1)(b) read with regulation 44,

9.9. Section 90(2)(b)(iii) read with section 101(1)(c), (f) and (g),

9.10. Section 52(5)(c) read with General Condition 5 of its conditions of registration as a credit provider, and

9.11. Section 52(5)(c) and (f) read with General Condition 3 of its conditions of registration as a credit provider read with regulation 62(1)(b) and (c) read further with regulations 64 and 66.

FACTS

10. In support of its application, the applicant filed the affidavit of Ms Leanne Schwartz, the applicant’s Investigations and Enforcement Department’s Manageress (Ms Schwartz).

11. At the outset, Ms Schwartz stated that she was duly authorised to launch the application on behalf of the applicant in terms of section 23(4) of the NCA. She averred that the applicant is an independent juristic person responsible for, among others, monitoring the consumer credit market to ensure that prohibited conduct is detected, prevented, and prosecuted. The respondent was registered as a credit provider with the applicant from 11 December 2018 and is still registered as such.

12. The applicant’s investigation into the business activities of the respondent followed a scouting exercise conducted by the applicant in October 2022. This scouting exercise was meant to confirm the business activities of certain credit providers in the Klerksdorp (North-West) area, specifically those entities of which no information of their registration details with the applicant could be located or who failed to display window decals of the applicant at their premises. One of the entities identified through the exercise was Friendly Credit Services, located at Neser Street, Klerksdorp Central, Klerksdorp.

13. During the above-mentioned scouting exercise, Ms Bongiwe Tyutu, an employee and a representative of the applicant, made an anonymous inquiry with a representative of Friendly Credit Services. The representative indicated that the entity charged 30% interest on its loans and extended credit to SASSA child-care grant recipients. The applicant’s Registration Department, however, did not have any information or records for Friendly Credit Services. This raised a reasonable suspicion that Friendly Credit Services was committing prohibited conduct. In light of this, on 5 December 2022, the applicant initiated a complaint against Friendly Credit Services in terms of section 136(2) of the NCA and authorised an investigation into its business practices in terms of section 139(1)(c) of the NCA.

14. On 7 December 2022, the applicant’s chief executive officer appointed Bongiwe Tyutu and Qhamani Loni as inspectors to investigate

the business activities of Friendly Credit Services in terms of section 25 of the NCA. The inspectors were mandated to select ten

(10) samples of consumer files and assess the business activities of Friendly Credit Services for purposes of determining, among others, the following:

14.1. Whether Friendly Credit Services was conducting business as a credit provider while not registered as such with the applicant in terms of the NCA.

14.2. Whether Friendly Credit Services was registered, and whether the entity properly displayed a window decal and correct registration

certificate at its business premises and properly displayed its registration number on pre- agreement statements and credit agreements.

14.3. Whether Friendly Credit Services was conducting proper affordability assessments in terms of section 81(2) read with regulation 23A of the NCA.

14.4. Whether Friendly Credit Services extended credit recklessly to consumers.

14.5. Whether Friendly Credit Services extended credit to SASSA grant recipients.

14.6. Whether the costs of credit charged in respect of credit agreements and whether they were in line with the provisions of the NCA.

14.7. Whether pre-agreement statements and quotations were in the prescribed form and provided to consumers.

14.8. Whether credit agreements were in the prescribed form and provided to consumers.

15. On or about 13 December 2022, the inspectors conducted an onsite investigation at Friendly Credit Services business premises in

Klerksdorp. They were met by a person who only introduced himself as Mr Jack. Mr Jack confirmed that Friendly Credit Services’

identity was FC African Trading Enterprise. He could not provide a copy of the registration certificate and advised that the certificate

was not in the respondent’s office. He informed the inspectors that the respondent offered short-term loans of R100.00 to R1200.00. The respondent also offered loans to the South African Social Security Agency (SASSA) grant beneficiaries who receive pension and disability grants.

16. Mr Jack indicated that the respondent conducted affordability assessments before granting credit by requiring clients to provide

them with bank statements, payslips, and identity documents. It did not retain credit bureau reports and used the Delfin System to calculate the costs of credit and interest rates. The inspectors randomly selected ten copies of consumer files from Mr Jack’s

laptop. However, the inspectors could not print the files at the respondent’s premises due to electricity load-shedding.

Instead, they arranged for the files and supporting documents to be submitted via email as soon as the electricity power was restored.

17. The requested files were later emailed to the inspectors. The files are annexed to the investigation report and marked as annexures E1 to E10. Upon assessing the files, it transpired that the prescribed information in the pre-agreement quotations was incomplete. The information on the credit agreement was not in the prescribed form, and some of the prescribed information was missing. In addition, there was no evidence that the respondent considered the consumers’ income and monthly obligations or that the respondent calculated the consumers’ discretionary income, and credit bureau reports were missing.

18. Following the conclusion of the above-mentioned investigation and upon assessing the sampled files, the inspectors compiled an investigation

report. Based on the investigation report, the applicant alleges that the respondent contravened the following sections of the NCA:

18.1. Section 52(5)(c) read with section 52(2)(a) and General Condition 5 of its conditions of registration in that the respondent failed to display a window decal and registration certificate.

18.2. Section 81(2)(a)(ii) read with regulations 23A(8), 23A(12)(b), and 23A(13) of the NCA in that the respondent failed to take reasonable steps to assess consumers’ debt repayment histories.

18.3. Section 81(2)(a)(iii) read with regulation 23A(3), 23A(12)(a) and (c) in that the respondent failed to take reasonable steps to ascertain and assess consumers’ actual financial means, obligations and monthly living expenses from the consumers’ credit bureau reports, salary payslips, bank statements, and declarations. Furthermore, it failed to calculate the consumers’

discretionary income.

18.4. Regulations 23A(9) and (10) in that in all the sampled files, the respondent failed to use the minimum expenses norms table.

18.5. Section 81(3) read with section 80(1)(a) in that the respondent entered into reckless credit agreements with consumers without conducting

affordability assessments.

18.6. Section 100(1)(c) read with section 101(1)(d)(ii) read further with regulations 40 and 42(1) in that the respondent exceeded the

prescribed maximum interest rate of 5% per month and charged excessive interest at a rate of between just over 6% and 9% per month.

18.7. Section 100(1) read with section 101(1)(b)(i) and regulations 42(2) and 43(3) in that the respondent charged an initiation fee in excess of the prescribed maximum fee.

18.8. Section 90(2)(1) reads with regulation 28 and Form 20 that the respondent failed to give consumers pre-agreement statements and quotations in the prescribed form before entering into small credit agreements with those consumers.

18.9. Section 93(2) reads with regulation 30 and Form 20.2 that the respondent failed to provide credit agreements to consumers in the prescribed form.

18.10. Section 90(2)(b)(iii) read with section 101(1)(c), (f) and (g) in that in all the sampled files, the respondent’s credit agreements contain an unlawful provision for penalty service fees to be charged on repayments in arrears. The penalty mentioned above is not allowed under the NCA, nor does it fall within the definition of penalty interest, default administrative charges, or collection costs.

18.11. Section 52(5)(c), (d), and (f) read with General Condition 3, regulation 62(1)(b) and (c), and regulations 64(2) and 66 in that the respondent failed to submit the annual statistical return and the Annual Financial and Operational Report form to the applicant.

19. The applicant seeks an order in the following terms:

19.1. Declaring that the respondent repeatedly contravened the above-cited provisions of the NCA.

19.2. Declaring the respondent’s conduct listed above prohibited conduct in terms of section 150(a) of the NCA.

19.3. Cancelling the respondent’s registration as a credit provider or that the investigated branch be closed.

19.4. An interdict restraining the respondent from engaging in similar prohibited conduct.

19.5. Declaring the agreements identified in the investigation report to have been recklessly granted and setting aside the consumers’ rights and obligations under such agreements as deemed just and reasonable or suspending the force and effect of such agreements as contemplated in section 83(2).

19.6. Directing the respondent to refund the cost of credit to the consumers if the agreements identified in the investigation report have been paid in full.

19.7. If enforcement action against the consumers identified in the investigation report has commenced, the respondent should rescind any judgments obtained against the consumers in respect of all credit agreements entered into without proper affordability assessments.

19.8. Directing the respondent to clear any adverse listings of judgments obtained with all credit bureaus.

19.9. Directing the respondent to refund the overcharged interest to all consumers mentioned in annexures E1 to E9 within 30 business days of the issuing of the Tribunal’s order and present proof to the applicant.

19.10. Declaring that the respondent acted with disregard for consumers’ rights.

19.11. Directing the respondent to appoint, at its own costs, an independent auditor within 30 days of the issuing of the judgment to identify all loans entered by the respondent without proper affordability assessments since its inception or at the investigated branch.

19.12. Directing that all identified loans where affordability assessments were not conducted in accordance with section 81(2) and regulation 23A of the NCA be referred to the applicant for a subsequent referral to the Tribunal for an appropriate order.

19.13. Directing that the independent auditor must determine and compile a list of all the consumers that the respondent charged interest and initiation fees that exceeded the prescribed maximum amounts since its inception and the amounts the consumers were overcharged with.

19.14. Directing that once the independent auditor has compiled the list mentioned above, the respondent must refund the amounts to each consumer within thirty (30) days from the date of the auditor’s report.

19.15. Stating that a closure or a move from the investigated premises does not absolve the respondent from conducting the audit.

19.16. Directing that the audit must be conducted within 120 days from the date of the appointment of the auditor.

19.17. Directing that the auditor’s report detailing the identity of the consumers, the identified credit agreements, the overcharges, and refunds made be presented to the applicant within ten (10) days of the completion of the audit.

19.18. Directing that a copy of the audit report be presented to the Tribunal within ten (10) days of the audit being completed.

19.19. Directing that following receipt of the audit report and supporting credit agreements, the applicant will, upon an appropriate assessment and consideration, apply to the Tribunal for an order declaring such identified agreements as reckless in terms of section 80(1)(a) of the NCA, and for further appropriate address to the identified consumers,

19.20. Imposing an administrative fine on the respondent in the amount of R1000 000.00 or 10% of the respondent’s annual turnover.

19.21. Any other appropriate order required to give effect to consumers’ rights as contemplated in section 150(i) of the NCA.

19.22. Further or alternative relief.

HEARING PROCEEDING ON A DEFAULT BASIS

20. Rule 13(1) of the Tribunal Rules[1] states-

“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.”

21. Rule 13(2) states, “An answering affidavit to an application or a referral other than an application for interim relief must be served on the parties and filed with the registrar within 15 business days of receipt by such party of the application.”

22. Rule 13(5) states, “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.”

23. Rule 25(3) states-

“The Tribunal may make a default order-

(a) After it has considered or heard any necessary evidence; and

(b) If it is satisfied that the application documents were adequately served.”

24. Rule 30(1) states-

“A document may be served on a party by-

(a) Delivering it to the party; or

(b) Sending it by registered mail to the party’s last known address.”

25. This application stands unopposed since the respondent failed to file an answering affidavit, and the 15 business days it had to do so expired.

26. Under rule 13(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.”

MATTER TO BE DECIDED

27. The Tribunal must decide whether the respondent contravened the provisions of the NCA as alleged and whether it should grant the

orders sought by the applicant.

THE LAW AND ANALYSIS OF THE EVIDENCE

Alleged contravention of section 52(5)(c) of the NCA read with General Condition 2 of the respondent’s Conditions of Registration

28. Section 52(5)(c) of the NCA states, “A registrant must comply with its conditions of registration and the provisions of this Act.” The applicant submitted that the respondent failed to operate its business in a manner that is consistent with the purpose and requirements of the NCA in violation of section 52(5)(c) read with General Condition 2 of its General Conditions of Registration.

29. Given our findings immediately below, we find that the respondent contravened section 52(5)(c) of the NCA read with General Condition 2 of its Conditions of Registration.

Alleged contravention of section 52(5)(c) read with section 52(5)(a) of the NCA and the General Condition 5 of the respondent’s Conditions of Registration

30. Section 52(5)(a) of the NCA states, “A registrant must post the certificate or duplicate registration certificate in any premises at or from which it conducts its registered activities.”

31. The applicant submitted that General Condition 5 of the respondent’s Conditions of Registration stipulates that a registrant must display a registration certificate at any business premises at or from which it conducts registered activities and must prominently display a window decal supplied by the applicant at the entrance of all business premises. The applicant alleges that in October 2022, the respondent failed to display a window decal and a valid registration certificate at its premises.

32. Given the above, we are satisfied that the respondent contravened section 52(5)(c) read with section 52(5)(a) of the NCA read with General Condition 5 of its Conditions of Registration.

Alleged contravention of section 52(5)(c), (d), and (f) of the NCA read with General Condition 3 of its conditions of registration as a credit provider read with regulation 62(1)(b) and (c) read further with regulations 64(2) and 66

33. As stated above, section 52(5)(c) of the NCA states, “A registrant must comply with its conditions of registration and the provisions of this Act.” Section 52(5)(d) of the NCA states, “A registrant must pay the prescribed annual renewal fees within the prescribed time.” Section 52(5)(f) of the NCA states, “A registrant must file any prescribed reports with the National Credit Regulator in the prescribed manner and form.”

34. Regulation 62(1)(b) and (c) of the NCA states that a credit provider must submit the following to the Statistical Returns and Annual Statistical Returns to the applicant. Regulation 64(2) of the NCA states, “All other credit providers must complete and submit the statistical return in Form 39 to the National Credit Regulator by the 15th of February each year for the period 1 January to 31 December.” Regulation 66 of the NCA states, “A credit provider must submit an annual financial and operational return in Form 40 to the National Credit Regulator, within 6 months after the registered credit provider’s financial year end.” In addition, General Condition 3 of the respondent’s Conditions of Registration, the respondent is required to submit reports and returns within the specified periods.

35. The applicant alleges that the respondent failed to submit the required Annual Statistical Return, Form 39, and the Annual Financial and Operational Report, Form 40, to the applicant.

36. Based on the submissions made by the applicant, we are satisfied that the respondent contravened section 52(5)(c), (d), and (f) of the NCA read with General Condition 3 of its conditions of registration as a credit provider read together with regulations 62(1)(b) and (c) and 64(2) and 66.

Alleged contravention of section 81(3) read with section 80(1)(a) of the NCA

37. 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;

or

(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 the consumer overindebted.”

38. Section 81(3) of the NCA states, “A credit provider must not enter into a reckless credit agreement with a prospective consumer.”

39. Section 81(2)(a)(ii) of the NCA states, “A credit provider must not enter into a credit agreement without first taking reasonable steps to assess the proposed consumer’s debt repayment history as a consumer under credit agreements.”

40. Section 81(2) (a)(iii) of the NCA states, “A credit provider must not enter into a credit agreement without first taking reasonable steps to assess the proposed consumer’s existing financial means, prospects, and obligations.”

41. In this regard, the applicant alleges that the respondent created the illusion of conducting affordability assessments. In reality, it did not take the required steps to ensure reasonable and accurate assessments.

42. Based on the evidence presented by the applicant, we are satisfied that the respondent contravened section 81(3) read with section 80(1)(a) of the NCA.

Alleged contravention of section 170 read with regulation 55(1)(b)(vi) of the NCA

43. Section 170 of the NCA states, “A credit provider must maintain records of all applications for credit, credit agreements and credit accounts in the prescribed manner and form and for the prescribed time.” Regulation 55(1)(b)(vi) of the NCA provides that a registrant must maintain pre-agreement statements and quotes.

44. We note, however, that the applicant stated that this is an alternative to the allegation that the respondent contravened section 81(2) and regulation 23A of the NCA, “and only to the extent that contrary evidence can be provided.” Since contrary evidence has not been provided, we don't need to determine whether the respondent contravened the provisions of section 170 of the NCA.

Alleged contravention of section 92(1) read with regulation 28(1)(b) and Form 20 of the NCA

45. 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.” Regulation 28(1)(b) of the NCA states that the pre-agreement statement and quotation given to a consumer in terms of section 92(1) of the Act must be in the format set out in Form 20.”

46. The applicant alleges that the document, which should be the pre-agreement statement in all the sampled files, is not in the prescribed form. In all the sampled files, the document presented to consumers did not reflect, among others, the respondent’s full names, physical address, and contact numbers. In addition, it did not reflect the applicable monthly interest rates and the rights and obligations of consumers.

47. Given the above, we are satisfied that the applicant has proved, on a balance of probabilities, that the respondent contravened section 92(1) read with regulation 28(1)(b) and Form 20 of the NCA.

Alleged contravention of section 93(1) and (2) of the NCA read with regulation 30(1) and Form 20.2

48. Section 93(1) of the NCA states, “The credit provider must deliver to the consumer, without charge, a copy of a document that records their credit agreement, transmitted to the consumer in a paper form, or in a printable electronic form.” Section 93(2) of the NCA states, “A document that records a small credit agreement must be in the prescribed form.” Regulation 30(1) of the NCA states, “A document that records a small credit agreement must contain all the information as reflected in Form 20.2.”

49. The applicant alleges that the respondent failed to provide credit agreements to consumers in the prescribed form, Form 20.2, in all the sampled files. All the sampled files lacked information on, amongst others, the type of agreement entered into, the full registered names and the physical address of the respondent, and the applicable monthly interest rate.

50. We are satisfied that the respondent contravened section 93(1) and (2) of the NCA read with regulation 30(1) and Form 20.2.

Alleged contravention of section 100(1)(c) read with section 101(1)(d)(ii) read further with regulations 40 and 42(1) of the NCA

51. Section 100(1)(c) of the NCA states, “A credit provider must not charge an amount to, or impose a monetary liability on, the consumer in respect of an interest charge under a credit agreement exceeding the amount that may be charged consistent with this Act.”

52. Section 101(1)(d)(ii) of the NCA states, “A credit agreement must not require payment by the consumer of any money or other consideration, except interest, which must not exceed the applicable maximum prescribed rate determined in terms of section 105.”

53. Regulation 40 of the NCA prescribes how interest may be calculated. Regulation 42(1) of the NCA prescribes maximum interest and initiation fees.

54. The applicant presented evidence that the respondent overcharged the consumers mentioned in annexures E1 to E8 an excessive interest rate of over 6% and 9%. This resulted in an overcharge of between 1% to 4% per month. Accordingly, we are satisfied that the respondent

contravened section 100(1)(c) read with section 101(1)(d)(ii) read further with regulations 40 and 42(1) of the NCA. Alleged contravention of section 100(1)(b) read with section 101(1)(b) and regulations 42(2) and 43(3) of the NCA

55. Section 100(1)(b) of the NCA states, “A credit provider must not charge an amount to, or impose a monetary liability on, the consumer in respect of an amount of a fee or charge exceeding the amount that may be charged consistent with this Act.”

56. Section 101(1)(b) of the NCA states-

“A credit agreement must not require payment by the consumer of any money or other consideration, except 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.”

57. Regulation 42(2) of the NCA stipulates that the maximum initiation fee on a short- term credit transaction is R165.00 per credit agreement plus 10% of the amount in excess of R1000.00.

58. Regulation 43(3) of the NCA prescribes that the maximum initiation fee may never exceed 15% of the principal debt.

59. The applicant alleges that the respondent charged consumers initiation fees that exceeded the prescribed maximum amount. In this regard, the applicant presented a table that shows the excessive charges.[2]

60. In view of the evidence presented by the applicant, we are satisfied that the respondent contravened section 101(1)(b) and regulations

42(2) and 43(3) of the NCA. Alleged contravention of section 90(2)(b)(iii) read with section 101(1)(c), (f) and (g) of the NCA

61. Section 90(2)(b)(iii) of the NCA states, “A provision of a credit agreement is unlawful if it directly or indirectly purports to set aside or override the effect of any provision of this Act.”

62. Section 101(1)(c), (f), and (g) of the NCA prohibits credit agreements that require payment by the consumer of any money or other consideration, except service fees, default administration charges, and collection costs which may not exceed the prescribed maximums.

63. The applicant submitted that all the sampled credit agreements contain a provision in clause 11 for penalty service fees to be charged on repayment arrears. Accordingly, we are satisfied that the respondent contravened section 90(2)(b)(iii) read with section 101(1)(c), (f), and (g) of the NCA.

CONCLUSION

64. We are satisfied that the applicant has proved on a balance of probabilities that the respondent repeatedly contravened the following sections of the NCA and that its conduct amounts to prohibited conduct.

65. We will now consider the applicant’s submissions on the appropriate administrative fine.

ADMINISTRATIVE FINE

66. Section 151 of the NCA provides that the Tribunal may impose an administrative fine in respect of prohibited conduct and that such a fine may not exceed the greater of 10% of the respondent’s annual turnover or R1 000 000.00, whichever is the greater.

67. Section 151(3) lists various factors the Tribunal must consider when determining an appropriate fine. These factors are discussed under the sub-headings below.

The nature, duration, gravity, and extent of the contravention

68. The applicant submits that the respondent repeatedly committed egregious contraventions of the NCA by failing to operate its business in the manner required under the NCA, failing to display a window decal and a validly issued registration certificate at its premises, failing to conduct any affordability assessments, extending credit recklessly, including an unlawful provision within its credit agreements, failing to provide pre-agreements and credit agreements in the prescribed form, overcharging of interest and initiation fees, and failing to submit its annual financial reports and returns.

69. The applicant submits that the respondent’s failure to adhere to the NCA indicates a disregard for the rights of consumers and ultimately, the industry within which the respondent conducts its business.

Loss or damage suffered as a result of the contraventions

70. The applicant submits that consumers were exploited by entering into loan agreements without the appropriate steps taken on affordability. The damage to consumers’ economic status has far-reaching implications as reckless lending can lead to over-indebtedness.

Consumers suffered losses through the charging of excessive interest.

The behaviour of the respondent

71. The respondent co-operated with the applicant during the investigation. However, there is no reason why the respondent, as a registered

credit provider, did not adhere to the provisions of the Act.

Market circumstances under which the contraventions occurred

72. The respondent extended reckless credit to consumers in desperate financial circumstances. These consumers belong to the most vulnerable sectors of our population, and the provisions of the NCA are specifically designed for their protection.

Level of profit denied from the contraventions

73. The applicant did not furnish the Tribunal with the respondent’s financial statements to quantify the level of profit derived by the respondent from its contraventions. However, the overcharging of interest and initiation fees demonstrate that an undue profit was gained by the respondent.

Degree of cooperation between the respondent and applicant

74. The respondent co-operated with the applicant’s inspectors during the investigation.

Prior contraventions committed by the respondent

75. The applicant submitted that no prior enforcement actions had been instituted against the respondent. The nature of the contraventions,

however, indicate that the respondent’s conduct has been ongoing for a substantial period.

CONCLUSION ON THE APPROPRIATE ADMINISTRATIVE FINE

76. The applicant has not submitted the respondent’s annual turnover. Therefore, it is impossible to quantify a fine based on the respondent’s annual turnover under the circumstances. On a conspectus of the evidence before the Tribunal, however, an

administrative fine of R 200 000.00 (Two Hundred Thousand Rands) is appropriate.

ORDER

77. It is hereby declared that the respondent repeatedly contravened the following provisions of the NCA:

77.1. Section 81(2)(a)(ii) and (iii) read with regulation 23A,

77.2. Section 81(3) read with section 80(1)(a),

77.3. Section 81(3) read with section 80(1)(b)(ii),

77.4. Section 92(1) read with regulation 28(1)(b) and Form 20,

77.5. Section 93(1) and (2) read with Regulation 30(1) and Form 20.2,

77.6. Section 100(1)(c) and 101(1)(d)(ii) read with regulation 42(1),

77.7. Section 100(1)(b) and 101(1)(b) read with regulations 42(2) and 43(3),

77.8. Section 90(2)(b)(iii) read with section 101(1)(c), (f) and (g),

77.9. Section 52(5)(c) read with General Condition 5 of its conditions of registration as a credit provider, and

77.10. Section 52(5)(c) and (f) read with General Condition 3 of its conditions of registration as a credit provider read with regulation 62(1)(b) and (c) read further with regulations 64 and 66.

78. The contraventions listed in paragraph 75 above are declared prohibited conduct in terms of section 150(a) of the NCA.

79. The respondent’s registration as a credit provider is cancelled with immediate effect.

80. The agreements identified in the investigation report are declared reckless and the consumers’ rights and obligations under such agreements are set aside as contemplated in section 83(2) of the NCA.

81. The respondent must refund the cost of credit to the consumers identified in the investigation report if the loans have been paid in full.

82. If enforcement action against the consumers identified in the investigation report has commenced, the respondent should file applications to rescind any judgements obtained against the consumers in respect of all credit agreements entered into without proper affordability assessments.

83. The respondent should take appropriate steps to remove any adverse listings of judgments obtained with all credit bureaus.

84. The respondent must refund the overcharged interest to all consumers mentioned in annexures E1 to E9 of the investigation report within 30 business days of the issuing of the Tribunal’s order and present proof to the applicant.

85. The respondent must appoint, at its own costs, an independent auditor who is a chartered accountant, within 30 days of the issuing of the judgement to identify all loans entered by the respondent without proper affordability assessments at the investigated branch.

86. All identified loans where affordability assessments were not conducted in accordance with section 81(2) and regulation 23A of the NCA must be referred to the applicant.

87. The respondent must direct the independent auditor to determine and compile a list of all the consumers that the respondent charged

interest and initiation fees that exceeded the prescribed maximum amounts at the investigated branch and the amounts the consumers were overcharged with.

88. A closure or a move from the investigated premises does not absolve the respondent from conducting the audit.

89. The respondent must ensure that the audit is conducted within 120 days from the date of the appointment of the auditor.

90. The respondent must ensure that the auditor’s report detailing the identity of the consumers, the identified credit agreements, the overcharges, and the refunds made are presented to the applicant within ten (10) days of the completion of the audit.

91. The respondent must pay an administrative fine in the amount of R200 000.00 within 90 days of the issuing of this judgment into the bank account of the National Revenue Fund, the details of which are as follows:

Bank: Standard Bank of South Africa

Account Holder: Department of trade and Industry Branch Name: S[…]

Branch code: 0[…]

Account number: 3[…]

Reference: NCT/267015/2023/57(1) and the name of the person or business making the payment.

92. There is no order as to costs.

(signed)

Dr A Potwana (Tribunal Member)

Mr CJ Ntsoane (Presiding Tribunal Member) and Mr S Mbhele (Tribunal Member) concur.

[1] 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).

[2] Page 29 of the paginated bundle.