National Credit Regulator v Finance Management Trust t/a Portel Finance and Others (NCT/138472/2019-140(1)) [2021] ZANCT 13 (3 June 2021)

IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN CENTURION

Virtually Via MS TEAMS

Case Number: NCT/138472/2019-140(1)

In the matter between:

NATIONAL CREDIT REGULATOR

APPLICANT

AND

FINANCE MANAGEMENT TRUST

1st RESPONDENT t/a PORTEL FINANCE

CHRISTIE VAN EYCK N.O. 2nd RESPONDENT

JACOB OOSTHUYSEN N.O. 3rd RESPONDENT

Coram:

Prof B Dumisa - Presiding Tribunal member

Ms. N Maseti - Tribunal member

Mr. T Bailey - Tribunal member

Date of hearing - 13 May 2021

Date of Judgment - 03 June 2021

JUDGMENT AND ORDER

APPLICANT

1. The Applicant in this matter is the NATIONAL CREDIT REGULATOR (hereinafter referred to as “the Applicant” and/or "the NCR"), a juristic person established in terms of section 12 of the National Credit Act ("the NCA" or "the Act")[1], with its offices situated at 127 Fifteenth Road, Randjespark, Midrand, in the Gauteng Province. At the hearing, Mr. Roy Stocker, the Applicant's Senior Legal Advisor: Investigations and Enforcement, represented the Applicant.

RESPONDENTS

2. The First Respondent is FINANCE MANAGEMENT TRUST t/a PORTEL FINANCE (Trust Number IT1207/2001) (hereinafter referred to as “the First Respondent”),a registered Trust with its offices at No. 3 T.E. Water Street, Graaff-Reinet, in the Eastern Cape.

3. The Second Respondent is CHRISTIE VAN EYCK, Nomine Officii, an adult female cited herein in her official capacity as Trustee of the Finance Management Trust, who shall be cited as the Second Respondent in these proceedings.

4. The Third Respondent is JACOB OOSTHUYSEN, Nomine Officii, an adult male cited herein in his official capacity as Trustee of the Finance Management Trust, who shall be cited as the Third Respondent in these proceedings.

5. The Respondents did file an Answering Affidavit, and the matter had been set down on an opposed basis, but the Respondents did not attend the hearing.

6. At the hearing, Mr. Roy Stocker, the Applicant’s legal representative, addressed the three members of the Tribunal, arguing why the hearing had to proceed on a default basis.

7. Having carefully listened to the Applicant's legal representative, the Tribunal decided to proceed on a default basis on the grounds that the Tribunal Registry had satisfied the Tribunal that there was proper service on the Respondents.

TYPE OF APPLICATION AND JURISDICTION

8. In this Application, the Applicant seeks an order declaring the Respondents to be in repeated contravention of the Act's various provisions and of having engaged in reckless lending.

9. In terms of section 27 of the Act , the Tribunal has jurisdiction.[2]

FACTORS CONSIDERED BEFORE THE TRIBUNAL DECIDED TO PROCEED WITH THE HEARING ON A DEFAULT BASIS

10. On 31 July 2019, Ms. Monique Burger, writing on behalf of Nico De Villiers, a director at the Brown Braude & Vlok Inc. firm of attorneys, wrote to Ms. Mbali Buthelezi, a Junior Legal Advisor at the NCR, confirming that they act on behalf of the Respondents. The email reads as follows:

“We refer to the above matter and confirm that we act on behalf of Finance Management Trust t/a Portel Finance, and your email correspondence dated 29th instant addressed to Michele Meyer has been referred to us for further attention and reply. Kindly note that we accept service of any legal documents per email at this email address (monique@bbv.co.za) on behalf of our client.”

11. On 13 August 2019, the Applicant’s Ms. Buthelezi, wrote the following to the Applicant’s legal representatives “As agreed, all future legal correspondence will be sent to the email provided and service will be accepted by the National Credit Regulator on the following email addresses: Mbuthelezi@ncr.org.za and Litigation@ncr.org.za. Please kindly find herein attached an application to the National Credit Tribunal in terms of Section 141(1) of the Act .”

12. On 28 August 2019, the Applicant wrote as follows to the Respondents “As agreed, all future correspondence will be served on the following address for the Applicant: Mbuthelezi@ncr.org.za and Litigation@ncr.org.za and for the Respondent Monique@bbv.co.za. Please kindly find herein attached a complete application in terms of section 140(1). This is an application for a hearing at the Tribunal. Once the Tribunal accepts the Application, a Filing notice will be sent to both parties with a case number. From the date, the filing notice is received. The Respondent will have 15 days to file an answering affidavit”.

13. On 30 August 2019, the Tribunal sent the Notice of Filing to all the relevant parties, including the Applicant and the Respondents.

14. 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, at least then.

15. On 10 September 2019, the Applicant got an email from Lewis Attorneys regarding Rule 33, wherein the latter placed themselves as the new Respondents’ attorneys of record and confirmed they would accept service of all documents, notices, and legal processes via email at ronel@lewies.co.za and pa@lewies.co.za. They also provided their physical address as Intercon Building, 534 Rooitou Avenue, Moreleta Park, Pretoria.

16. On 11 October 2019, the Tribunal issued the Notice of Set Down for 19 November 2019.

17. On 15 November 2019, the Respondents’ new attorneys of record lodged’, with the Tribunal, a Notice of Application for condonation, in terms of Tribunal Rule 34. The Order they sought from the Tribunal was:

17.1 Leave for the late filing of the Answering Affidavit;

17.2 Condonation of any other departure from the rules or procedures of the Tribunal; and

17.3 Further and/or alternative relief.

18. On 18 November 2019, the Tribunal issued a Notice of Removal of this matter from the Hearing Roll of 19 November 2019. The Registrar served the same on all the parties by email.

19. 0n 12 December 2019, Lewis Attorneys withdrew as the Respondents’ attorneys of record, and were replaced by LLR Incorporated.

20. On 11 June 2020, the Tribunal granted the Respondents condonation for the late filing of their Answering Affidavit. They also ordered the Applicant to file its Replying Affidavit within 10 (ten) business days of receipt of the condonation judgment.

21. On 20 October 2020, the Tribunal set down this matter for a virtual hearing, via MS TEAMS, on 13 May 2021.

22. The Respondents did not attend the hearing on 13 May 2021, and neither did they send any legal representative.

23. The Tribunal requested the Registry to furnish evidence if there was proper service on the Respondents, which they proved as detailed above.

24. The Applicant made oral submissions to the Tribunal stating why it was in the interests of justice for the hearing to proceed on a default basis, as there were no reasonable grounds for the Respondents’ failure to attend the hearing.

25. Having listened to both the Tribunal Registry and the Applicant, the Tribunal panel confirmed that it was satisfied that there was proper service of all pleadings. The Respondents were also adequately notified of the date, time, and venue of the proceedings.

26. 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. The hearing proceeded in the absence of the Respondent in terms of Rule 24 of the Tribunal Rules.[5]

APPLICANT'S SUBMISSIONS

27. 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 First Respondent was previously registered as a credit provider with the Applicant under registration number NCRCP2710 for about ten years from the 17th of August 2007 until its registration lapsed on 01 August 2017.

28. 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 Applicant's information from the South African Social Security Agency (SASSA) to the effect that, among other things, the Respondent allegedly used prohibited methods when collecting repayments on credit agreements and that it charged excessive interest rates under its credit agreements.

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

29. The Applicant's Chief Executive Officer, in terms of Section 25 of the NCA, duly appointed Linda Mhlongo (hereinafter referred to as “Mhlongo”), an employee of the Applicant at the time employed as a Junior Legal Advisor in its Investigations and Enforcement Department, as an inspector for purposes of investigating the Respondents business practices. The scope of investigation was for the inspector to select at least ten samples of consumer files at the Respondent's place of business and assess the Respondent's business practices to determine the following:

29.1 Whether the Respondent granted credit recklessly in terms of Section 80 of the Act;

29.2 Whether the Respondent entered into credit agreements without first taking reasonable steps as required in terms of Section 81(2) of the Act;

29.3 Whether the Respondent did apply the Minimum Expenses Norms, use the credit bureau reports, and other information in determining whether the consumers qualify or not for credit;

29.4 Whether the Respondent complied with Regulation 23A when conducting affordability assessments; and

29.4 Whether the cost of credit levied in terms of the credit agreement complied with the allowable amount to be charged in terms of the Act.

30. On 29 April 2019, the inspector visited the Respondent's principal place of business at No. 3 T E Water Street, Graaff-Reinet, in the Eastern Cape Province. Mhlongo was accompanied by members of the South African Police Services (SAPS).

30.1 At the Respondent's place of business, the inspector and the SAPS found Fredeline Pienaar (hereinafter referred to as “Pienaar), who introduced herself as a consultant representing the Finance Management Trust; and

30.2 The inspector duly produced their certificates in terms of Section 25 of the Act. Further, he explained the provisions of Section 139(4) of the Act, which entitles the inspector to question the Respondents.

31. During the investigation, the inspector offered the following information about the Respondents’ business practices. The Finance Management Trust’s registration as a credit provider had lapsed for two years since 31 July 2017 due to its failure to make full payment of the prescribed annual registration fees in terms of section 52(4)(b)(iii) of the NCA. The Respondents had failed to pay the registration fees for their nine registered branches, which meant their registration as a credit provider had lapsed by operation of the law.

32. The inspector requested the Respondents to provide them with copies of ten consumer files approved during 2019. The inspector emphasized that each file must contain the following documents:

32.1 Pre-agreement statements and quotations;

32.2 Credit agreements;

32.3 Bank statements and salary advice;

32.4 Consumer's disclosed monthly expenditures;

32.5 Consumer's credit profiles;

32.6 Mechanisms used to conduct affordability assessments; and

32.7 Credit life insurance agreements where applicable.

33. The inspector assessed the selected files and compiled an investigation report.

Based on the inspector's report, the Applicant alleges that the Respondents contravened the following provisions of the NCA:

33.1. Section 81 (1) (a) (ii) and (iii) of the NCA, read with regulation 23, in that the Respondents failed to take reasonable steps to assess the debt repayment history of the consumer under credit agreements as well as the consumers’s existing financial means, prospects and obligations;

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

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

33.4. The interest charged on all consumer files exceeded the maximum amounts allowed in terms of the Act. As a result, the Respondents contravened Section 100(1)( c) and Section 101(1)(c ) and (d)(ii) read with Regulation 42(1) of the Act;

33.5. The Respondents levied cost of credit life insurance which exceed the maximum prescribed amount allowed by the Act Life Insurance Regulations; and

33.6. By so doing, the Respondents have accordingly repeatedly contravened Section 100(1)(b) and Section 106(8) read with Credit Life Insurance Regulation 3(1).

APPLICANT'S PRAYERS

34. The Applicant seeks an order declaring that the Respondents repeated contraventions of the provisions of the following Sections of the Act:

(a) Section 81(2)(a)(ii) read with Regulation 23A(13);

(b) Section 81(2)(a)(iii) read with Regulation 23A(12)(a) and (b) of the Act;

(c) Section 81(3) read with Section 80(1)(a) of the Act;

(d) Section 81(3) read together with Section 80(1)(b)(ii) of the Act;

(e) Section 170 read together with Regulation 55(1)(b)(vi);

(f) Section 100(1)(c ) and Section 101(1)(d)(ii) read with Regulation of the Act; and

(g) Regulations 64 and 66 as well as Section 52(5)(c ) of the Act read with condition A3 of the Respondents’ conditions of registration.

35. Declaring the Respondents’ conduct in contravention of the relevant Sections of the Act outlined above as prohibited conduct in terms of Section 150(a) of the Act.

36. Interdicting the Respondents from future breaches of the NCA.

37. Imposing an administrative fine upon the Respondents in the amount of R1 Million or 10% of the Respondent's annual turnover, whichever is greater.

38. Declaring the Respondents’ credit agreements with consumers as reckless in terms of Section 80 (1) (a) of the NCT and setting aside all of the consumers' obligations under those agreements.

39. Further to the above, the Applicant wants the Respondents to be ordered to:

39.1. 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 Respondents in the past year to determine if any consumers were overcharged on interest and/or service fees, and provide a list of such consumers as well as the amount by which each such consumer was overcharged;

39.2. Once the auditor mentioned above has compiled the above-mentioned report, within 30 days from the date of the auditor's report, refund the consumers all the amounts which exceeded the prescribed maximum amounts allowed by the Act;

39.3. 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

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

40. 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

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

Nature, duration, gravity, and extent of the contraventions

41.1. The Applicant extracted a sample of ten credit agreements concluded by the Respondents and found that every one of those agreements had been concluded recklessly by the Respondents;

41.2. Reckless credit granting and levying excessive costs of credit are serious contraventions of the Act. Consumers risk becoming over-indebted by the Respondents granting credit without taking reasonable steps to determine the consumer's ability to afford the credit repayments. The conduct of the Respondents cannot be benevolently considered because of the gravity and regularity of the offenses committed by the Respondents have the potential to cause consumers extreme prejudice;

41.3. Although all the credit agreements sampled were concluded in June 2019, it is clear that the contraventions arise from a systemic flaw in the Respondents’ credit granting practices. Thus it is reasonable to infer that most, if not all of the Respondents’ credit agreements concluded since its inception, were and are reckless;

41.4. The full extent and effect of the Respondents’ conduct will most likely negatively affect consumers who have to make provisions to repay another credit agreement with the Respondents. This may have long-term effects on consumers' financial well-being;

Loss or damage suffered as a result of the contraventions

41.5. The Respondents’ conduct have severely prejudiced consumers, and they will most likely suffer enormous financial hardships if they are not refunded the cost of credit paid to the Respondents. All the consumers who have been granted reckless credit and overcharged by the Respondents are entitled to refunds;

The behaviour of the Respondents

41.6. There is no plausible reason for the Respondents to be unaware of the provisions of the Act and its statutory obligation to adhere to all of the Act's provisions. The very fact that the Respondents elected to become a registered credit provider is indicative that the Respondents is aware of the prescripts of the Act;

41.7. The Respondents’ behaviour, which is of particular concern, is how it merely pays lip service to its duty to grant credit responsibly – i.e., pretends to follow the prescribed procedure for conducting affordability assessments without really conducting proper affordability assessments. The Respondents completed the affordability assessments forms, and the Respondents obtains credit bureau reports merely to create the appearance of compliance. However, the conduct's substance shows that the reasonable steps required to conduct proper affordability assessments were not taken;

Market circumstances under which the contraventions occurred

41.8. It is submitted that the Respondents’ conduct illustrates that the market circumstances within which the contraventions occurred are one in which consumers are not educated about their rights relating to access to credit. Many of the consumers are exploited to the unjust benefit of the Respondents;

Level of profit derived from contraventions

41.9. A substantial profit was likely derived from the unlawful activities undertaken by the Respondents. However, the Applicant is unable to provide detailed information as to the level of profit derived by the Respondents due to the Respondents’ failure to submit prescribed financial and statistical reports to the Applicant;

41.10. The Applicant places on record that it will request that the Tribunal orders the Respondents to provide copies of its management accounts and audited annual financial statements over the relevant period so that the appropriate level of profit may be determined the turnover for purposes of determining of a fine;

Degree of co-operation between the Respondents and Applicant

41.11. The Respondents co-operated with the Applicant during the investigation; and

Prior contraventions committed by the Respondent

41.12. There are no prior investigations or enforcement actions instituted by the Applicant against the Respondents. However, the contraventions' nature and duration indicate that the Respondents’ conduct have been ongoing before the investigation.

42. The Applicant submitted that regarding the preceding factors and gravity of the Respondents’ contraventions, the Applicant wants the Tribunal to impose an administrative fine on the Respondents.

ISSUES TO BE DECIDED

43. The issues to be decided include whether the Respondents repeatedly contravened the NCA provisions as alleged by the Applicant. If so, whether an administrative fine should be imposed on the Respondents, and the amount of the administrative fine, if any.

THE LAW

44. 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 noted.

45. 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."

46. 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 that consumer over-indebted."

47. 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 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."

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

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

49. 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, maybe 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)."

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 Respondents failed to take reasonable steps to assess the debt repayment histories of consumers, to examine bank statements properly, to read and apply credit bureau reports available, or to obtain the most recent credit bureau reports for purposes of assessing prospective consumers' debt repayment histories before entering into credit agreements with consumers;

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

55.3. in contravention of sections 101 of the NCA read with Regulation 23A of the NCA, the Respondents failed to disclose the total cost of credit to consumers before entering into credit agreements with them;

55.4. in contravention with Regulation 64 (2) of the NCA, the Respondents failed to complete and submit a statistical return (Form 39) by 15 February each year. The Respondents 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; and

55.5. in contravention with Regulation 66, the Respondents failed to complete and submit an annual financial and operational return (Form 40) to the Applicant within six months after the Respondents’ financial year. Since its registration in 2007, the Respondents have not once submitted a Form 40 to the Applicant.

56. Given the averments that Ms. Du Plooy made in her affidavit, the documentary evidence annexed to the Applicant's founding affidavit, the Respondents’ 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 Respondents 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 Respondents repeatedly contravened various provisions of the NCA. As envisaged under section 150 (a) of the NCA, the Respondents’ 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 offense 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 Respondents repeatedly contravened various provisions of the NCA, it follows that the Applicant would have established a clear basis for the cancellation of the First Respondent’s registration with the Applicant in terms of section 150 (g) of the NCA. The First Respondent’s registration lapsed in July 2017. In terms of section 150 (b) of the NCA, the Tribunal may make an order interdicting the Respondents 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 Respondents. 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 First 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 Respondents exploited consumers. By extending credit without conducting proper affordability assessments, the Respondents 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 a considerable period of time at the detriment of consumers who were exposed to the unlawful practices of the Respondents. The duration of these unlawful practices cover the period 2007 when the First Respondent was first registered as the credit provider to 2019, which was 2 years after their registration had lapsed.

63. Gravity: The Respondents’ conduct show a total disregard for the consumer protection measures provided for in the NCA and the regulated credit industry. It is conceivable that the Respondents’ unlawful practices extended to its branches operated in other provinces, thus widespread.

64. Extent: The fact that the Applicant found contraventions of the NCA in all the files its inspector extracted from Respondents show that the Respondents 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 Respondents conduct through the excessive costs of credit.

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

67. The Tribunal accepts the Applicant's submission that the Respondents’ conduct illustrate that the market circumstances within which the contraventions occurred are those in which consumers are not educated on their rights relating to credit access. 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 Respondents co-operated with the Applicant's inspector.

Prior contraventions committed by the Respondents

70. There are no prior investigations or enforcement actions instituted by the Applicant against the Respondents. However, the Tribunal takes a very dim view that the Respondents have 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[6] (Federal-Mogul case), the Competition Tribunal held that deterrence is the primary purpose of imposing administrative penalties.[7] 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 Respondents 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. Sections 101 (1) (c) (iii) and 105 (1) (b) and Regulation 44 of the Act; and

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

73. The Respondents’ conduct stated in paragraphs 55 to 58 above constitutes prohibited conduct. The Respondents’ repeated and numerous contraventions of the Act's provisions conclusively demonstrate that the Respondents are a danger to the public and should be interdicted from future breaches of the Act.

74. Having found that, in all the sampled files, the Respondents failed to conduct proper affordability assessments as envisaged in section 80 (1) (a) of the Act, 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 Act, 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 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 Respondents’ 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 R1 000 000 (One Million Rand).

76. The Tribunal believes it is imperative to appoint an independent auditor, within 30 days, at the Respondents’ own costs, 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 Respondents have overcharged these consumers. Once the auditor has compiled the list, the Respondents 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 Respondents 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 Respondents are 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 100(1)( c) and 101(1)(d)(ii) read together with Regulation 42(1) ;

77.1.5. Sections 100 (1) (b) and 101(1)( c)(iii) and Regulation 44 of the Act; and

77.1.6. Section 91(2) read with Section 100(1)(b) and Section 101(1)( c)(iii) read with Regulation 44;

77.2. The Respondents’ conduct stated above is hereby declared prohibited conduct in terms of Section 150 (a) of the NCA;

77.3. The Respondents are interdicted from in future engaging in prohibited conduct;

77.4. The Respondents’ credit agreements with the following consumers, contained in Annexures C1 to C10 of the Investigation Report (which is attached to the Applicant’s Founding affidavit) are declared reckless in terms of Section 80(1)(a) of the NCA;

77.4.1 PRINS, Krisjan;

77.4.2 MAKOBA, Hans;

77.4.3 SCHRAMBREEL, Christian;

77.4.4 SAMPSON, Basil;

77.4.5 SCHOLTZ, Jordan;

77.4.6 LOTTERING, Cecilia;

77.4.7 LOTTERING, Magdalena;

77.4.8 PLAATJIES, Gracy;

77.4.9 ROBERTS, Johannes; and

77.4.10 KOEBERG, Franstro Sebastien;

77.5. All of the consumers’ obligations under those agreements are hereby set aside;

77.6. The Respondents shall, at their own costs;

77.6.1 Refund all the costs of credit charged and recovered from consumers under all such agreements;

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

77.6.3 Take all such steps as may be necessary in order to ensure that;

77.6.3.1 Any adverse credit bureau records which may have arisen as a result of the consumer having concluded such credit agreements with the Respondents are removed;

77.6.3.2 Any civil judgments taken by the Respondents against such consumers in respect of such agreements are rescinded or, if rescission is not possible, abandoned;

77.7. The Respondents must appoint an independent auditor at its own costs within 30 days of issuing this Order who must identify all credit agreements concluded by the Respondents during the period 29 August 2016 to August 2019, to identify all consumers who were overcharged on interest and/or service fees – including Intecon transaction processing fees – and provide a list of such consumers as well as the amount by which each such consumer was overcharged on interest and/or service fees;

77.8. Once the auditor has compiled the report as mentioned above, the Respondents must, within 30 (thirty) days from the date of the auditor's report;

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

77.8.2. 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;

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

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

77.9. Once the refunds have been made, the Respondents 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;

77.10. The Respondents are further ordered to ensure that the appointed auditor also, as part of the report referred to above, identifies all credit agreements which the Respondents entered into without properly conducting assessments in terms of Section 81(2)(a)(ii) and/or (iii) of the Act, once so identified, the Applicant is authorized to approach the Tribunal on these same papers (duly supplemented where necessary) for an order;

77.10.1 Declaring those agreements as reckless in terms of Section 80(1)(a) of the Act;

77.10.2 Setting aside all of the consumer’s obligations under those agreements; and

77.10.3 Ensuring all the consumers who were affected by such reckless lending get similar protection as detailed under paragraph 77.8;

77.11. In terms of Section 151 of the Act and having considered all the circumstances of this case, the Tribunal imposes an administrative fine of R1 000 000.00 (One Million 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

in terms of section 151 (5) of NCA within 60 (sixty) ordinary days of issuing this Order;

77.12. The Respondents are interdicted from any further breaches of the NCA; and

77.13. There is no order made as to costs.

Thus, done and signed at Centurion on 03 June 2021.

{signed}

Prof B Dumisa

Presiding Tribunal Member

Mr. T Bailey (Tribunal Member) and Ms. N Maseti (Tribunal Member) concurring.

[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.”

[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] 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.”

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

[7] At para 166.