National Credit Regulator v Hand in Hand Financial Services CC trading as Thuso Finance (NCT/158511/2020/140(1)) [2021] ZANCT 30 (31 August 2021)

IN THE NATIONAL

CONSUMER TRIBUNAL

HELD

IN CENTURION

Case number: NCT/158511/2020/140(1)

In the matter between:

NATIONAL

CREDIT REGULATOR

APPLICANT

and

HAND

IN HAND FINANCIAL SERVICES CC

RESPONDENT

TRADING

AS THUSO FINANCE

Coram:

Mr A Potwana – Presiding Tribunal member

Prof T Woker – Tribunal member

Prof B Dumisa – Tribunal Member

Date of Hearing: 26 August 2021

JUDGEMENT AND

REASONS

APPLICANT

1. The Applicant is the National Credit Regulator, a juristic person established in terms of section 12 of the National Credit Act[1] (the Applicant or the NCR). During the hearing, the Applicant’s Senior Legal Advisor, Ms L Schwartz (Ms Schwartz), represented the Applicant.

RESPONDENT

2. The Respondent is Hand in Hand Financial Services CC, a close corporation that is duly registered in terms of the corporate laws of the Republic of South Africa with its registered address at 12491 Magogoe Tlhabologo Village. Mmabatho, 2735. The Respondent was registered as a credit provider with the Applicant under the registration number: NCRCP13615 and traded under the name and style of Thuso Finance.

TYPE

OF APPLICATION AND JURISDICTION

3. This is a referral in terms of section 140(2)(b) of the NCA.

4. In terms of section 27 of the NCA, the National Consumer Tribunal (Tribunal) has jurisdiction to hear this application.[2]

5. Due to the Covid 19 pandemic and the resultant social distancing protocol, the hearing took place via a Microsoft Teams video and audio link.

BACKGROUND

6. On 25 March 2020, the Applicant served an application in terms of section 140(1) of the National Credit Act 34 of 2005 (NCA) on the Respondent by registered mail and filed the same with the Registrar of the Tribunal (Registrar).

7. The Applicant’s case is stated in its founding affidavit. The deponent is Anne-Carien Du Plooy (Ms Du Plooy), an acting manageress in the Applicant’s Investigations and Enforcement Department. According to Ms Du Plooy, the Respondent has been registered as a credit provider with the Applicant since 9 March 2009 under the registration number: NCRCP3801. The Respondent’s registration with the Applicant lapsed on 30 October 2015 due to its failure to pay its renewal fees within the prescribed time periods.

8. The Applicant initiated a complaint in terms of section 136(2) of the NCA after receiving information from the offices of the Directorate for Priority Crimes situated in the Mafikeng region, North West Province, about the business practices of certain credit providers who were identified to be overcharging consumers on interest and extending credit recklessly in that area. Thuso Finance Cash Loans, which was recognised as the Respondent during the investigation, was identified as one of the entities that were committing the above-mentioned prohibited practices. The received information raised serious concerns regarding the business practices of Thuso Finance Cash Loans and gave rise to a reasonable suspicion that its business practices constituted prohibited conduct.

9. On 12 August 2019, the Applicant authorised an investigation in terms of section 139(1)(c) of the NCA into the business practices of the Thuso Finance Cash Loans. On or about the 15th day of August 2019, the Applicant’s Chief Executive Officer appointed two inspectors to carry out the investigation. On 20 August 2019, the inspectors conducted an onsite investigation at the Respondent’s business premises situated at Molopo Road, Mahikeng, North West. During the onsite investigation, an interview was conducted with a Mr Robert Motlhala (“Mr Motlhala”), who identified himself to be the owner of the Respondent. It was discovered that Thuso Finance Cash Loans was, in fact, the Respondent. Copies of 10 consumer files were provided to the inspectors. Later on, one of the inspectors, Musandiwa, compiled an investigation report. During the assessment of the files, it was found that the Respondent only provided copies of the first pages of credit agreements for each of the sampled files. All attempts to obtain complete copies became futile.

10. The Applicant alleges that the Respondent contravened the following provisions of the NCA:

10.1. Section 40(3) in that it entered into credit agreements whilst being unregistered;

10.2. Section 81(2)(a)(ii) read with regulation 23A(12)(b) and (13) in that it failed to take reasonable steps to assess consumers’ debt repayment histories;

10.3. Section 81(2)(a)(iii) read with regulation 23A(3) in that it failed to conduct a proper assessment of the consumers’ financial means, prospects and obligations;

10.4. Regulation 23A(8) and 23A(12)(a) and (c) in that it failed to calculate consumers’ existing financial means, prospects and obligations;

10.5. Regulations 23A(9) and (10) in that it failed to utilise the prescribed minimum expenses norm table when granting credit to consumers;

10.6. Section 81(3) read with section 80(1)(a) and section 80(1)(b)(ii) in that it failed to conduct proper affordability assessments and extended credit recklessly to consumers;

10.7. Section 88(4) read with section 81(3) in that it extended credit to consumers who were already under debt review;

10.8. Section 170 read with regulation 55(1)(b)(vi) in that it did not keep proper records in support of steps taken in terms of section 81(2) of the NCA;

10.9. Section 92(1) read with regulation 28(1)(b) and Form 20 in that it failed to provide consumers with pre-agreement statements and quotations in the prescribed form;

10.10. Section 93(2) read with regulation 30(1) and Form 20.2 in that the Respondent failed to provide consumers with credit agreements in the prescribed form;

10.11. Section 100(1)(c) read together with section 101(1)(d)(ii) and regulation 42(1) in that it overcharged consumers interest in excess of the prescribed rate; and

10.12. Section 100(1)(b) read together with Section 101(1)(c)(iii) read with regulation 44 in that it charged a service fee to consumers in excess of the prescribed maximum amount.

11. The Applicant seeks an order in the following terms:

11.1. Declaring that the Respondent repeatedly contravened the provisions of the NCA cited above;

11.2. Declaring the Respondent’s repeated contraventions of the provisions of the NCA cited above to be prohibited conduct in terms of section 150(a) of the NCA;

11.3. Interdicting and restraining the Respondent from contravening the NCA;

11.4. Declaring the Respondent’s credit agreements with consumers, contained in annexures “E1” to “E10” of the Investigation Report reckless in terms of section 80(1) of the NCA;

11.5. Imposing an administration fine not exceeding the greater of or R1000 000.00 or 10% of the Respondent’s annual turnover;

11.6. That the Respondent appoints an independent auditor within 30 days at its own cost to:

11.6.1. Determine and compile a list of all the consumers who were charged initiation and service fees that exceeded the prescribed maximum amounts and the amounts they were overcharged by;

11.6.2. Refund consumers the prohibited amounts within 30 days from the date of the auditors’ report;

11.6.3. Once the refunds have been made, the Respondent must provide a written report to the Applicant detailing the identity of the consumers and the refunds made. This report must be provided to the Applicant within 120 days from the date of the order;

11.6.4. Determine and compile a list of all consumers who were granted loans recklessly by the Respondent;

11.6.5. Once the auditor has complied the list mentioned above, the Respondent must:

11.6.5.1. remove all credit bureau listings recorded by or on behalf of the Respondent, against the credit records of consumers it granted credit without conducting proper and accurate affordability assessments, as required by the NCA;

11.6.5.2. write off all open loans that were found to be reckless;

11.6.6. once the accounts have been identified and loans have been written off, as stated above, the Respondent must provide an auditor’s report to the Applicant detailing the identity of the consumers and the amounts written off within 120 days after the Tribunal order has been obtained; and

11.6.7. Any further or alternative relief envisaged under section 150(i) of the NCA.

12. Concerning the administrative fine, the Applicant made the submissions summarised under different headings below.

Nature, duration, gravity and extent of the contraventions

13. In every sampled file, the Respondent contravened the NCA.

14. The Respondent’s non-compliance with the NCA shows its complete disregard for consumers and the credit industry.

Loss or damage suffered as a result of the contravention

15. Consumers suffered direct financial loss due to the overcharged interest and service fees.

The behaviour of the Respondent

16. The Respondent was well aware of its lapsed status. There is no good reason why it continued to conduct the business of a credit provider whilst being unregistered.

Market circumstances under which the contraventions occurred

17. The Respondent’s conduct illustrates that the market circumstances within which the contraventions occurred are one in which consumers are not educated about their rights.

Level of profit derived from the contraventions

18. The excessive overcharging proves that the Respondent obtained a profit.

Degree of co-operation

19. Although the Respondent co-operated with the Applicant during the investigation, the extent of such cooperation is questionable because the Respondent failed to provide all the required documentation.

Prior contraventions committed by the Respondent

20. While there are no prior contraventions of the NCA by the Respondent, the nature of the contraventions of the present case shows that the conduct has been ongoing for a substantial period.

21. On 7 April 2020, the Registrar issued a Notice of Filing and served it on the parties. On 7 October 2020, the Registrar issued a Notice of Set Down for the matter to be heard on 14 April 2021. On 14 April 2021, the Respondent’s representative, Mr Motlhala, informed the Tribunal that the Respondent did not receive the application documents and expressed the Respondent’s intention to oppose the application. He requested that the hearing be postponed. The hearing of the matter was postponed sine die, and the Applicant was ordered to serve the application documents on the Respondent by email. The Respondent was ordered to file an answering affidavit and an application for condonation within 15 days of the issuing of the postponement ruling.

22. On 16 April 2021, the Applicant re-served the application documents on the Respondent by email and filed the same with the Registrar. On 10 June 2021, the Registrar issued a Notice of Set Down for the application to be heard on 26 August 2021 and served it to the parties by email on 11 June 2021.

HEARING

OF THE APPLICATION ON A DEFAULT BASIS

23. Notwithstanding the postponement of the hearing on 14 April 2021 to enable the Respondent to apply for condonation for the late filing of an answering affidavit, the Respondent did not do so. On the day of the hearing, Mr Motlhala appeared on behalf of the Respondent. He submitted that he was unable to file the Respondent’s condonation application as he contracted the coronavirus and did not have funds to pay for legal representation. He stated that whilst the Respondent is guilty of contravening certain provisions of the NCA as alleged by the Applicant; the Respondent requested that the hearing be postponed again in order to enable it to file opposing papers. Ms Schwartz opposed the application for a postponement. She argued that Mr Motlhala failed to state when he got infected with the coronavirus and to provide a timeline for failure to file the application for condonation since the issuing of the postponement ruling. She pointed out that the Tribunal is statutorily bound to conduct its hearings as expeditiously as possible and that it was not in the interests of justice and consumers to delay the finalisation of the matter.

24. The Tribunal panel adjourned the hearing to deliberate on the merits of the application for a further postponement. On resumption, the presiding Tribunal member advised the parties that it was not in the interests of justice to grant the Respondent a further postponement. Thereafter, the hearing proceeded on an unopposed basis.

25. During the hearing, Ms Schwartz submitted that the Applicant abandons the following:

25.1. The allegation that the Respondent contravened section 100(1)(b) read with section 101(1)(c)(iii) and regulation 44 of the NCA in that it charged the consumers indicated in annexures “E4”, “E6”, “E7”, “E8” and “E9” of the Applicant’s investigation report a service fee in excess of the prescribed maximum amount;

25.2. The allegation that the Respondent contravened section 170 of the NCA;

25.3. Interdicting and restraining the Respondent from contravening the NCA; and

25.4. The order sought that the Respondent should write off all open loans that the appointed independent auditor found to be reckless.

ISSUE

TO BE DECIDED

26. The issue to be decided is whether the Tribunal can grant the orders sought by the Applicant on a default basis.

THE

LAW

27. Rule 13(5) of the Tribunal Rules 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.”

28. Rule 25(3) of the Tribunal Rules 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.”

CONSIDERATION

OF THE MERITS

29. The Applicant has alleged and presented evidence in the form of copies of consumer files that were annexed to its investigation report. In view of the provisions of rule 13(5) of the Tribunal Rules and the evidence presented to the Tribunal, we are satisfied that the Respondent’s registration lapsed due to non-payment of its annual renewal fees within the prescribed time periods and this remains the status quo. Furthermore, we are satisfied that the Respondent contravened the following provisions of the NCA:

29.1. section 40(3) in that despite its lapsed registration status, it advanced credit to consumers;

29.2. section 81(2) read with regulation 23A in that it failed to conduct affordability assessments in accordance with the NCA prior to granting credit to consumers;

29.3. section 81(2)(a)(ii) read with regulation 23A(12)(b) and 23A(13) in that it failed to take reasonable steps to assess consumers’ debt repayment histories;

29.4. section 81(2)(a)(iii) read with regulation 23A(3) and regulations 23A(8), (12)(a) and (c) in that it failed to assess consumers’ financial means, prospects and/or obligations;

29.5. regulation 23A(9) and (10) in that it failed to utilise the prescribed expense norms when granting credit to consumers;

29.6. section 81(3) read with section 80(1) in that it extended credit to consumers recklessly;

29.7. section 81(3) read with section 80(1)(b)(ii) in that it entered into credit agreements with consumers that made such consumers over-indebted;

29.8. section 81(3) read with section 88(4) in that in failing to conduct proper affordability assessments, it failed to discover that two consumers in the sampled consumer files were under debt review;

29.9. section 93(2) read with regulation 30(1) and Form 20.2 in that it failed to provide consumers with credit agreements in the prescribed form;

29.10. section 92(1) read with regulation 28(1)(b) and Form 20 in that it failed to provide consumers with pre-agreement statements and quotations in the prescribed form;

29.11. section 100(1)(c) read with section 101(1)(d)(ii) and regulation 42(1) in that it overcharged consumers interest in excess of 7, 50% to 13, 40% per month; and

29.12. section 100(1)(b) read with section 101(1)(c)(iii) and regulation 44 in that it charged a service fee to consumers whose names appear in annexures “E2”, “E3” and “E5” in excess of the prescribed maximum amount.

CONCLUSION

30. In view of the provisions of rule 13(5) of the Tribunal Rules and the evidence presented to the Tribunal, we are satisfied that the Respondent contravened the following provisions of the NCA:

30.1. section 40(3);

30.2. section 81(2) read with regulation 23A of the NCA;

30.3. section 81(2)(a)(ii) read with regulation 23A(12)(b) and 23A(13);

30.4. section 81(2)(a)(iii) read with regulation 23A(3) and regulations 23A(8) and (12)(a) and (c);

30.5. regulation 23A(9) and (10);

30.6. section 81(3) read with section 80(1);

30.7. section 81(3) read with section 80(1)(b)(ii);

30.8. section 81(3) read with section 88(4);

30.9. section 93(2) read with regulation 30(1) and Form 20.2;

30.10. section 92(1) read with regulation 28(1)(b) and Form 20;

30.11. section 100(1)(c) read with section 101(1)(d)(ii) and regulation 42(1); and

30.12. section 100(1)(b) read with section 101(1)(c)(iii) and regulation 44.

31. Concerning the appropriate administrative penalty, we have considered the following:

31.1. The fact that in every sampled file, the Respondent contravened provisions of the NCA shows that the Respondent did not care about the welfare of consumers and acted in callous disregard of its conditions of registration;

31.2. Consumers suffered financial loss due to the overcharging of interest and service fees;

31.3. The Respondent offered the services of registered providers whilst no longer registered;

31.4. The Respondent exploited consumers;

31.5. The Respondent derived a profit from its unlawful conduct;

31.6. The Respondent did not fully co-operate with the Applicant’s investigators; and

31.7. There Respondent was not previously found to have contravened the NCA.

32. On a conspectus of the evidence before the Tribunal, an administrative fine of R200 000. 00 is appropriate.

ORDER

33. The Tribunal makes the following order: -

33.1. the Respondent is found guilty of contravening the following provisions of the NCA:

33.1.1. section 40(3);

33.1.2. section 81(2) read with regulation 23A of the NCA;

33.1.3. section 81(2)(a)(ii) read with regulation 23A(12)(b) and 23A(13);

33.1.4. section 81(2)(a)(iii) read with regulation 23A(3) and regulations 23A(8) and (12)(a) and (c);

33.1.5. regulation 23A(9) and (10);

33.1.6. section 81(3) read with section 80(1);

33.1.7. section 81(3) read with section 80(1)(b)(ii);

33.1.8. section 81(3) read with section 88(4);

33.1.9. section 93(2) read with regulation 30(1) and Form 20.2;

33.1.10. section 92(1) read with regulation 28(1)(b) and Form 20;

33.1.11. section 100(1)(c) read with section 101(1)(d)(ii) and regulation 42(1); and

33.1.12. section 100(1)(b) read with section 101(1)(c)(iii) and regulation 44;

33.2. the Respondent’s repeated contraventions of the provisions of the NCA cited above is declared prohibited conduct in terms of section 150(a) of the NCA;

33.3. the Respondent’s credit agreements with consumers mentioned in annexures “E1” to “E10” of the Applicant’s Investigation Report is hereby declared reckless in terms of section 80(1) of the NCA;

33.4. the Respondent must appoint an independent auditor within 30 days of the issuing of this order at its own cost to determine and compile a list of all the consumers who were charged initiation and service fees that exceeded the prescribed maximum amounts and the amounts they were overcharged by;

33.5. the Respondent must refund consumers the prohibited amounts within 30 days from the date of the auditors’ report and provide a written report to the Applicant detailing the identity of the consumers and the refunds made within 120 days from the date of the order; and

33.6. the Respondent must pay an administrative fine of Two Hundred Thousand Rands (R200 000.00) 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 sixty (60) ordinary days of the issuing this order; and

33.7. There is no order made as to costs.

Thus, done and signed at Centurion on 31 August 2021.

{signed}

Mr A Potwana

Presiding Tribunal Member

Prof T Woker (Tribunal Member) and Prof B Dumisa (Tribunal Member) concur.

[1] 34 of 2005 as amended (NCA/Act).

[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.’