National Credit Regulator v Mbhanzima Cash Loans Trading Enterprise CC t/a Mbhanzima Cash Loans and Another (NCT/318855/2024/140(1)) [2024] ZANCT 24 (1 July 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/318855/2024/140(1)

In the matter between: NATIONAL CREDIT REGULATOR APPLICANT and MBHANZIMA CASH LOANS TRADING ENTERPRISE CC FIRST RESPONDENT TRADING AS MBHANZIMA CASH LOANS MAVIS SHIRINDZA TRADING AS SECOND RESPONDENT MBHANZIMA CASH LOANS TRADING ENTERPRISE

Coram:

Mr S Mbhele - Presiding Tribunal

Member

Dr A Potwana - Tribunal Member

Mr S Hockey - Tribunal Member

Date of Hearing - 19 June 2024

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 127 Fifteenth Road, Randjespark, Midrand, Gauteng. During the hearing, the applicant was represented by its Senior Legal Advisor, Mr Mboniseni Mathivha.

2. The first respondent is Mbhanzima Cash Loans Trading Enterprise CC trading as Mbhanzima Cash Loans, a close corporation duly registered in terms of the company laws of the Republic of South Africa with its registered physical address at Stand No. 11104, Nkunzani Village, Bongani, 0930.

3. The second respondent is Mavis Shirindza, an adult female trading as Mbhanzima Cash Loans Trading Enterprise. The second respondent’s physical address is Stand No. 1088, Nkunzani Village, Khomanani, 0960.

4. On the day of the hearing, there was no representative on behalf of the first and second respondents (the respondents).

APPLICATION TYPE AND JURISDICTION

5. This is an application in terms of section 140(1)(b) of the NCA which states:

“After completing an investigation into a complaint, the National Credit Regulator may make a referral in accordance with subsection (2), if the National Credit Regulator believes that a person has engaged in prohibited conduct.”

6. Section 27(a)(ii) 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 adjudicate in relation to any 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)(ii) of the NCA, the Tribunal has jurisdiction to consider this application.

HEARING PROCEEDING ON A DEFAULT BASIS

8. On 20 March 2024, the applicant filed an application against the respondents in terms of section 140(1) of the NCA with the Registrar of the Tribunal (Registrar).

9. 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.”

10. Rule 13(2) of the Tribunal Rules 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.”

11. 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.”

12. 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.”

13. Rule 30(1) of the Tribunal Rules 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.”

14. Rule 24(1) and 2) 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).”

15. Notwithstanding proper service, the respondents failed to file an answering affidavit, and the 15 business days they had to do so expired. On the day of the hearing, the Tribunal was satisfied that the respondents were properly notified of the date, time, and venue of the proceedings, and the hearing continued in the absence of the respondents.

16. In accordance with rule 13(5) of the Tribunal Rules, 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

17. The Tribunal is required to determine whether the respondents contravened the provisions of the NCA as alleged and whether the orders sought by the applicant should be granted.

BACKGROUND

18. The applicant’s case is stated in its founding affidavit. It alleges that the respondents are jointly and severally acting as credit providers and are jointly and severally liable for contravening the NCA. The first respondent was registered as a credit provider with the applicant on 12 May 2014 under NCRCP6816. Due to its failure to pay its annual renewal fees within the prescribed time periods in 2021, the first respondent’s registration lapsed by operation of law on 31 July 2021.

19. The second respondent has never been registered as a credit provider with the applicant. However, the second respondent commenced and continued acting as a credit provider under the auspices of Mbhanzima Cash Loans Trading Enterprises after the first respondent’s registration with the applicant lapsed. A notification from the Companies and Intellectual Property Commission (CIPC) indicated an impending deregistration of the first respondent on or about 12 April 2021. The applicant argues that if the impending deregistration status of the first respondent will affect its accountability to consumers and lead to the first respondent escaping liability, the second respondent must be held accountable jointly and severally with the first respondent for contraventions of the NCA and the prejudice caused to consumers.

FACTS

20. This referral has its origins in a complaint initiated by the applicant in terms of section 136(2) of the NCA. This section empowers the applicant to initiate a complaint in its own name. The applicant received an informal complaint from Conny Maringa alleging that the first respondent extended a loan of R10 000.00 to her. The loan was payable within 12 monthly instalments of R4500.00. The total repayable amount was R48 600.00. After the applicant engaged with the respondents' representatives or family members, the second respondent, being the director of the first respondent, contacted the applicant in the presence of the consumer and advised that the complainant was withdrawing the complaint. During the engagements, the first respondent’s representatives

or the second respondent's family members were uncooperative and displayed threatening attitudes. As a result of these observations or experiences, the applicant formed a reasonable belief that the withdrawal of the complaint by the complainant was informed by these attitudes.

21. Based on the background information the applicant obtained and the discussions it held with the first respondent’s representatives or the second respondent's family members, the applicant acquired further information that the first respondent retained consumer instruments to secure loan repayments. Such consumer instruments were allegedly held at the second respondent’s place of residence. The first respondent’s refusal to provide the complainant with a settlement letter and its excessive charges also caused the applicant to be suspicious. As a result of these observations, the applicant suspected that the first respondent’s conduct was not in accordance with the provisions of the NCA and constituted prohibited conduct as defined in section 1 of the NCA.[2]

22. In light of the above, on or about 7 November 2022, the applicant initiated a complaint against the first respondent in terms of section 136(2) of the NCA and authorised an investigation into the business practices of the first respondent in terms of section 139(1)(c) of the NCA. On or about 6 February 2023, the applicant’s Chief Executive Officer (CEO) appointed two inspectors to carry out investigations into the first respondent’s practices.

23. On or about 2 May 2023, the Waterval Magistrates’ Court issued a search warrant that entitled the applicant’s inspectors and members of the South African Police Service (SAPS) to search the first respondent’s premises and seize any prohibited instruments, including, but not limited to, consumer bank cards, identity documents, South African Social Security Agency (SASSA) cards, loan books, and credit agreements.

24. A total of 523 instruments, including 389 identity documents, 8 Easy Pay Green cards, 7 classic Sure Cards, 27 miscellaneous bank cards, 47 SASSA cards, and 1 Nu-Pay speed point, were seized and removed by the SAPS from the first respondent’s premises.

25. During the interview and upon request, a person by the name of Mpho Mukwevho provided an overview and summary of the first respondent’s loan-granting process. Amongst others, he stated that:

25.1. The owner of the first respondent was the second respondent, Mavis Shirindza;

25.2. The first respondent granted loans to SASSA recipients;

25.3. The first respondent was not a registered credit provider but was extending credit at the time of the investigation;

25.4. The first respondent granted short and unsecured loans ranging from R200.00 to R10 000.00, which are payable in one to six months;

25.5. The first respondent did not obtain or check credit bureau reports and did not check whether consumers were blacklisted or under debt review before granting credit;

25.6. Interest was charged at the rate of 40% per month;

25.7. The first respondent did not provide consumers with pre-agreement statements, quotations, or copies of credit agreements; and

25.8. The first respondent used consumers’ bank cards to withdraw money for the instalments.

26. For assessment purposes, one of the applicant’s inspectors, Luvo Nkone, selected 10 consumer instruments from the instruments found in the respondents’ possession, assessed the evidence, and compiled a report.

27. Based on its findings, the applicant alleges that the respondent has contravened the following provisions of the NCA:

27.1. section 52(5)(d);

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

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

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

27.5. regulation 23A(8) and (12)(a);

27.6. section 52(5)(e) read with section 170 read further with regulation 55(1)(b)(iv);

27.7. section 81(3) read with section 80(1)(a);

27.8. section 52(5)(e) read with section 170 read further with regulation 55(1)(b) and regulation 56;

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

27.10. regulation 23A(15)(a) and (d);

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

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

27.13. section 133(1) and (2) read with section 90(2)(l).

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

28.1. Declaring that the respondents repeatedly contravened the above-cited provisions of the NCA and declaring its conduct prohibited conduct in terms of section 150(a) of the NCA;

28.2. Declaring that the respondent has brought the credit industry into disrepute or that the respondent acted with disregard for consumers’ rights generally;

28.3. Declaring the agreements identified in the investigation report to have been recklessly granted;

28.4. Interdicting the respondents from, in the future, engaging in prohibited conduct and from further extending any credit to consumers;

28.5. Interdicting the respondents from collecting on any credit agreements found to have been extended recklessly;

28.6. Ordering the respondents to immediately return consumer instruments that were not found during the execution of the search warrant to their rightful owners or to immediately hand over such instruments to the SAPS;

28.7. Ordering the respondents to refund any amounts charged and recovered from the consumers over and above the initial loan amounts or to refund all identified consumers captured within the samples or the police inventory annexed to the investigation report any amounts charged and recovered over and above the initial loan amounts;

28.8. The imposition of an administrative fine on the respondents jointly and severally, in the amount of R1 000 000.00 (One Million Rands) or 10% of the respondents' annual turnover, whichever is greater;

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

28.10. Further or alternative relief.

ASSESSMENT OF THE EVIDENCE AND THE LAW

Alleged contravention of section 40(1) read with section 40(3) of the NCA

29. Although the applicant did not mention section 40(1) read with section 40(3) of the NCA in its referral form, it alleges that the respondents extended credit whilst not registered as credit providers in contravention of section 40(1) read with section 40(3) of the NCA. It submits that all agreements entered into by the respondents and consumers since the inception of the first respondent and since the second respondent commenced granting credit are deemed unlawful and void to the extent provided in section 89 of the NCA.

30. Section 40(1) of the NCA states that “A person must apply to be registered as a credit provider if the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeds the threshold prescribed in terms of section 42(1).” The prescribed threshold is nil.[3]

31. Section 40(3) of the NCA states that “A person who is required in terms of subsection (1) to be registered as a credit provider, but who is not so registered, must not offer, make available or extend credit, enter into a credit agreement or agree to do any of those things.”

32. In view of the presented evidence, which shows that the respondents offered, made available, or extended credit and entered into credit agreements while not registered, we find that the respondents contravened sections 40(1) and 40(3) of the NCA.

Alleged failure to pay renewal fees

33. The applicant alleges that the first respondent failed to pay its annual renewal fees within the prescribed time period in 2021, and its registration lapsed by operation of law on 31 July 2021. Section 52(5)(d) of the NCA states, “A registrant must pay the prescribed annual renewal fees within the prescribed time.” Accordingly, we find that the first respondent contravened section 52(5)(d) of the NCA.

Alleged failure to conduct proper affordability assessments and reckless lending

34. The applicant alleges that the respondent failed to conduct affordability assessments in accordance with the requirements of section 81(2) and regulation 23A of the NCA. The evidence obtained during the investigation proves that no assessments were conducted at all. In this regard, the respondents failed to assess the consumers’ debt repayment histories in that they failed to obtain credit bureau reports before entering into credit agreements with consumers. No such reports could be located in all 10 sampled files annexed to the investigation report. The respondent’s failure in this regard rendered it unable to have regard to, amongst

others, open loans, access adverse credit records, and arrear statuses of accounts. The applicant charges that the respondent contravened section 81(2)(a)(ii) read with regulation 23A(12)(b) and (13) of the NCA.

35. Section 81(2)(a)(ii) of the NCA states that “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.”

36. Regulation 23A(12)(b) of the NCA Regulations[4] states that “When conducting the affordability assessment, the credit provider must take into account all monthly debt repayment

obligations in terms of credit agreements as reflected on the consumer's credit profile held by a registered credit bureau.”

37. Regulation 23A(13) of the NCA Regulations states:

“A credit provider must take into account the consumer's debt repayment history as a consumer under credit agreements, as envisaged in section 81(2)(a), and must ensure that this requirement is performed:

(a) within seven (7) business days immediately prior to the initial approval of credit or the increasing of an existing credit limit; and

(b) within fourteen (14) business days with regards to mortgages.”

38. The applicant further alleges that the respondent failed to take any reasonable steps to assess consumers’ existing financial means, prospects, and obligations in contravention of section 81(2)(a)(iii) read with regulation 23A(3) and (12)(c) of the NCA. More specifically, the respondents failed to obtain current salary advices or proof of income of consumers in all the sampled files annexed to the investigation report. Accordingly, the respondents were not in a position to verify, validate, or establish consumers’ monthly income. Furthermore, the respondents failed to obtain any current bank statements of consumers in all the sample files. This rendered the respondents unable to determine the current financial position of consumers at the time of extending credit to

consumers. As a result of not obtaining consumers' proof of income, the respondent failed to apply the minimum expense norms table or failed to provide any evidence of making the necessary calculations required in terms of regulations 23(A)(9) and (10) of the NCA.

39. 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.”

40. Regulation 23A(3) of the NCA states, “A credit provider must take practicable steps to assess the consumer or joint consumer's discretionary income to determine whether the consumer has the financial means and prospects to pay the proposed credit instalments.”

41. Regulation (12)(c) of the NCA states:

“When conducting the affordability assessment, the credit provider must: -

(a) calculate the consumer's discretionary income;

(b) take into account all monthly debt repayment obligations in terms of credit agreements as reflected on the consumer's credit profile held by a registered credit bureau; and

(c) take into account maintenance obligations and other necessary expenses.”

42. In addition to the above, the applicant alleges that the respondent failed to calculate consumers’ discretionary income before extending credit to consumers. This is evidenced by the fact that no such calculations could be located in any of the sampled files. The applicant charges that the respondents’ conduct in this regard contravenes regulations 23(A)(8) and 23A(12)(a) of the NCA.

43. Regulations 23(A)(8) of the NCA Regulations states, “A credit provider must make a calculation of the consumer's existing financial means, prospects, and obligations as envisaged in sections 78(3) and 81(2)(a)(iii) of the Act.”

44. Regulation 23A(12)(a) of the NCA Regulations states, “When conducting the affordability assessment, the credit provider must calculate the consumer's discretionary income.”

45. The applicant alleges that by not conducting affordability assessments, the respondent extended credit recklessly to consumers. By so doing, the respondents contravened section 81(3) read with section 80(1)(a) of the NCA. Section 80(1)(a) 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) 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. Section 81(3) of the NCA states, “A credit provider must not enter into a reckless credit agreement with a prospective consumer.”

46. None of the sampled files contains any evidence that the respondents conducted affordability assessments. In fact, annexures “D1” to “D10” to the applicant’s founding affidavit are comprised of single pages that show copies of consumers’ bank cards and small papers on which the names of consumers, the Personal Identification Numbers of their bank cards and instalment details are written.

47. In view of the above, we find that the respondents contravened section 81(2)(a)(ii) read with regulation 23A(12)(b) and (13) of the NCA, section 81(2)(a)(iii) read with regulation 23A(3) and (12)(c) of the NCA, regulations 23(A)(8) and 23A(12)(a) of the NCA, regulation 23A(9) and 23A(10), and section 81(3) read with section 80(1)(a) of the NCA.

Failure to keep records as required by the NCA

48. During the hearing, Mr Mathivha withdrew the applicant’s allegation that by failing to retain copies of affordability assessments and the steps taken to conduct affordability assessments and calculations, the respondents contravened section 52(5)(e) read with section 170 read further with regulation 55(1)(b) and regulation 56 of the NCA. Accordingly, we consider the allegation withdrawn and make no finding.

Failure to provide consumers with pre-agreement statement in the prescribed form

49. The applicant alleges that the respondent failed to provide consumers with pre- agreement statements and quotations in the prescribed form in contravention of section 92(1) read with regulation 28(1)(b) and Form 20. This is evident from the sampled files, as no such pre-agreement statements or quotations could be located therein.

50. 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.”

51. 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 NCA must be in the format set out in Form 20.

52. The applicant further alleges that the respondents' failure to make the necessary disclosures in terms of the cost of credit related to the sampled files is a contravention of regulation 23A(15)(a) and (d) of the NCA. Regulation 23A(15)(a) of the NCA states, “A credit provider must disclose to the consumer the credit cost multiple and total cost of credit in the pre-agreement statement and quotation.” Regulation 23A(15)(d) of the NCA states that a credit provider must disclose a total cost of credit which includes, but is not limited to, the principal debt; interest; initiation fee, if any; service fee aggregated to the life of a loan; and credit insurance aggregated to the life of a loan, as set out in section 106 of the NCA.

53. In view of the absence of pre-agreement statements and quotations, we are of the view that the respondents failed to disclose to consumers the credit cost multiple and total cost of credit in pre-agreement statements and quotations in contravention of section 92(1) read with regulation 28(1)(b) of the NCA, and regulation 23A(15)(a) and (d) of the NCA.

Alleged failure to provide consumers with credit agreements in the prescribed form

54. The applicant alleges that the respondents failed to provide credit agreements in the prescribed form to consumers in all the sampled files in contravention of section 93(1) and (2) read with regulation 30 and Form 20.2 of the NCA.

55. Section 93(1) and (2) of the NCA states:

“(1) 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.

(2) A document that records a small credit agreement must be in the prescribed form.”

56. Regulation 30 of the NCA states:

“(1) A document that records a small credit agreement must contain all the information as reflected in Form 20.2.

(2) The information listed in Form 20.2 may be disclosed in the order of choice of the credit provider.

(3) For purposes of electronic or telephone originated small agreements, the electromagnetic recording and transcribing of the agreement will be sufficient, provided that the consumer is supplied with a copy of the agreement within a reasonable time.”

57. In view of the conspectus of the evidence tendered by the applicant, we are of the view that the applicant has proved, on a balance of probabilities, that the respondents failed to provide consumers with copies of credit agreements in contravention of section 93(1) and (2) read with regulation 30 of the NCA.

Alleged overcharging of interest

58. The applicant stated that the overwhelming documentary evidence annexed to the applicant’s founding affidavit proves that the respondents conduct business as credit providers. There is no interest percentage on the papers attached to the cards with consumers’ names and payment terms. The cost of credit is not adequately recorded by the respondents. This, together with the complainant’s complaint, proves that the respondent overcharges consumers on interest in excess of the maximum prescribed

rates in contravention of section 100(1)(c) and (d) read with regulation 42(1) of the NCA. In addition, the applicant alleges that

the respondent’s failure to properly disclose the cost of credit to consumers contravenes regulation 23(A)15 of the NCA.

59. Section 100(1)(c) and (d) of the NCA states:

“A credit provider must not charge an amount to, or impose a monetary liability on, the consumer in respect of –

(a) …

(b) …

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

(d) any fee, charge, commission, expense or other amount payable by the credit provider to any third party in respect of a credit agreement, except as contemplated in section 102 or elsewhere in this Act.”

60. Regulation 42(1) of the NCA prescribes the maximum interest rates that credit providers may charge in respect of various types of credit agreements.

61. Regulation 23(A)15 of the NCA obliges credit providers to disclose to consumers the credit cost multiple and the total cost of credit.

62. It is evident that the respondents charged consumers exorbitant amounts. However, there is no evidence of the percentage of the interest charged by the respondents. In its founding affidavit, the applicant claimed that Mpho Mukwevho advised the inspectors that interest was charged at the rate of 40% per month. This averment, however, is not supported by the contents of the applicant’s investigation report. More specifically, there is no indication in the applicant’s investigation report that the respondents charged an interest rate of 40% per month.

63. Copies of the sampled files show that the respondents entered into short-term credit transactions[5] with consumers for terms not exceeding six months. Regulation 42 of the NCA Regulations prescribes a maximum interest rate of 5% per month for short-term credit agreements. This percentage works out to 30% over six months.

64. In the absence of evidence that proves that the respondents charged interest in excess of 5% per month or 30% over six months or that any fee, charge, commission, expense, or other amount payable by the credit provider to any third party in respect of a credit agreement, except as contemplated in section 102 or elsewhere in the NCA, we find no basis to conclude that the respondent contravened section 100(1)(c) and 101(1)(d) read with regulation 42(1) of the NCA.

Alleged possession of prohibited instruments.

65. The applicant submits that the respondents were found in possession of consumers’ instruments which were successfully limited to the information in the loan book in violation of section 133(1) and (2) read with section 90(2)(l) of the NCA. In this regard, the respondent was found to be in possession of a total of 523 consumer instruments.

66. Section 133(1) and (2) of the NCA states:

“(1) A credit provider must not –

(a) make use of any document, number, or instrument referred to in section 90(2)(l) when collecting on or enforcing a credit agreement; or

(b) direct or permit any other person to do anything contemplated in this subsection on behalf, or as an agent, of the credit provider.

(2) When collecting money owed by a consumer under a credit agreement or when seeking to enforce a credit agreement, a credit provider must not use or rely on, or permit any person to use or rely on, any document, instrument, or contract provision referred to in section 90(2)(l).”

67. Section 90(2)(l) of the NCA states:

“A provision of a credit agreement is unlawful if it expresses an agreement by the consumer to –

(i) deposit with the credit provider, or with any other person at the direction of the credit provider, an identity document, credit or debit card, bank account or automatic teller machine access card, or any similar identifying document or device; or

(ii) provide a personal identification code or number to be used to access an account.”

68. The applicant submits that the SAPS seized and removed 523 instruments, including 389 identity documents, 8 Easy Pay Green cards, 7 classic Sure Cards, 27 miscellaneous bank cards, 47 SASSA cards, and 1 Nu-Pay speed point, from the respondent’s premises. In addition, the copies of the sampled consumer files show that the respondents made use of consumers’ bank cards when collecting or enforcing credit agreements. Accordingly, we find that the respondent contravened section 133(1) and (2) read with section 90(2)(l) of the NCA.

CONCLUSION

69. We are satisfied that the applicant has proved, on a balance of probabilities, that the respondents repeatedly the following contravened sections and regulations of the NCA:

69.1. section 40(1);

69.2. section 40(3);

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

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

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

69.6. regulations 23(A)(8) and 23A(12)(a);

69.7. section 81(3) read with section 80(1)(a);

69.8. section 92(1) read with Regulation 28(1)(b) of the NCA;

69.9. regulation 23A(15)(a) and (d);

69.10. section 93(1) and (2) read with regulation 30; and

69.11. section 133(1) and (2) read with section 90(2)(l).

70. Further, we find that the first respondent contravened section 52(5)(d) of the NCA.

71. In view of the above finding, we conclude that:

71.1. The respondents’ contravention of the above-mentioned sections of the NCA is prohibited conduct in terms of section 150(a) of the NCA.

71.2. The respondents have brought the credit industry into disrepute and the respondents acted with disregard for consumers’ rights generally.

71.3. The agreements identified in the investigation report were granted recklessly.

71.4. The respondents should be interdicted from collecting on any credit agreements found to have been extended recklessly.

71.5. The respondents should be ordered to immediately return consumer instruments that were not found during the execution of the search warrant to their rightful owners or to immediately hand over such instruments to the SAPS.

71.6. The respondents should be ordered to refund any amounts charged and recovered from the consumers over and above the initial loan amounts or to refund all identified consumers captured within the samples or the police inventory annexed to the investigation report any amounts charged and recovered over and above the initial loan amounts.

72. Concerning the order sought by the applicant that the respondents should be interdicted from, in the future, engaging in prohibited conduct and from further extending any credit to consumers, in Shoprite Investment Limited v The National Credit Regulator[6], a full bench of the High Court of South Africa (Gauteng Division, Pretoria) stated that, given the provisions of the NCA, such an order would not serve any purpose and set aside the Tribunal’s order.

73. We now turn to consider the applicant’s submissions on the appropriate administrative fine.

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

The applicant’s submissions on an appropriate administrative fine

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

75. The applicant submits that the respondents have jointly and severally repeatedly committed egregious contraventions of the NCA by failing to pay the renewal fees and trading whilst not registered, failing to conduct any affordability assessments, extending credit recklessly, failing to provide pre-agreement statements and quotations and credit agreement, overcharging interest, failing to retain records, and retaining prohibited instruments as a means to enforce the repayment and of avoid the process to be followed upon default.

76. The applicant submits that reckless credit granting is probably the most egregious contravention of the NCA because it leads to over-indebtedness, which in turn can damage the entire consumer credit industry and thus undermine an express purpose of the NCA to create a sustainable credit market. From the sampled files, together with the information received from the complainant, it has been established that the conduct has been going on for some time, or at least since the first respondent’s registration as a credit provider.

77. The respondent’s conduct on the retention of prohibited instruments is defined as an offence and is by its nature very serious as it unfairly prejudices consumers’ rights to use or access their bank accounts, claim their benefits, obtain further credit, and further infringes their rights to vote during elections. In all the sampled credit agreements obtained, the respondent contravened the NCA. This illustrates the respondents’ total disregard for the NCA, the rights of consumers, and, ultimately, the industry within which the respondents conduct business.

Loss or damage suffered as a result of the contraventions

78. The applicant submits that consumers have suffered losses or damages because of the respondents’ conduct. The respondents exploited consumers by entering into loan agreements with them without taking proper and appropriate steps to ensure that consumers could afford the repayment terms. The damage to consumers’ economic status is far-reaching if consumers have to apply to be

placed under debt review as a result of over-indebtedness. In all sampled files, the respondents granted credit recklessly for their own benefit. The respondents’ financial gain and the consumers’ prejudice and loss are evident. The actual loss or damage, however, cannot be accurately determined because of the respondent’s failure to properly disclose the cost of credit applicable to the credit agreements.

The behaviour of the respondent

79. The applicant submits that there is no plausible reason for the respondents to be unaware of the provisions of the NCA and the obligations imposed therein. The very fact that the first respondent elected to become a registered credit provider indicates that both respondents are and should be aware of the prescripts of the NCA.

80. The respondents’ conduct in failing to produce evidence of proof of any financial assessment, use of the minimum expense norms, calculations of discretionary income, and pre-agreement and credit agreement demonstrates a deliberate disregard for the requirements of the NCA.

Market circumstances under which the contraventions occurred

81. The applicant submits that the conduct of the respondents illustrates that consumers are not educated about their rights relating to access to credit in the market within which the contraventions occurred. Consumers were exploited to the unjust benefit of the respondents. The respondents’ prohibited conduct affects vulnerable consumers and consumers will have become reliant on debt. This is a market of consumers who are pensioners and recipients of SASSA grants and will find it most difficult to recover from the respondents’ exploitative conduct.

Level of profit derived from the contraventions

82. The applicant submits that a substantial profit has been derived from the activities undertaken by the respondents in contravention of the NCA. Each loan extended recklessly would result in a profit for the respondent, as such loans should not have been granted in the first place. The respondents have not submitted any annual financial statements and returns, and as such, no documents could be submitted to this Tribunal. The last annual financial statement received from the first respondent was for the 2018 financial year. Notwithstanding, argues the applicant, even in the absence of the respondents’ annual turnovers, the Tribunal is not deterred from making a finding that the respondents gained a substantial profit from their unlawful activities.

Degree of co-operation between the respondent and applicant

83. The applicant submits that the respondents co-operated with the applicant’s inspectors during the investigation. However, the extent of the corporation is questionable if regard is to be had to the documents presented or the lack thereof.

Prior contraventions committed by the respondent

84. The applicant submits that no prior enforcement actions had been instituted against the respondents. The nature of the contraventions, however, indicates that the respondents’ conduct has been ongoing for a substantial period of time before the investigation.

Determination of the appropriate administrative fine

85. The applicant has not submitted the respondents’ annual turnover. Therefore, it is impossible to quantify a fine based on the respondents’ annual turnover under the circumstances. However, the respondents’ modus operandi demonstrates a total disregard for the provisions of the NCA. The respondent’s failure to conduct affordability assessments, its extension of credit to SASSA recipients, and retaining their bank cards cannot be countenanced. Such conduct deserves a hefty administrative fine that can, hopefully, deter other unregistered credit providers from engaging in such oppressive and contemptible practices.

86. On conspectus of the evidence before the Tribunal and having considered the amounts of loans granted by the respondents, an administrative fine of R200 000.00 (Two Hundred Thousand Rands) is appropriate.

ORDER

87. It is hereby ordered that:

87.1. The respondents repeatedly contravened the following provisions of the NCA:

87.1.1. section 40(1);

87.1.2. section 40(3);

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

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

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

87.1.6. regulations 23(A)(8) and 23A(12)(a);

87.1.7. section 81(3) read with section 80(1)(a);

87.1.8. section 92(1) read with regulation 28(1)(b) of the NCA;

87.1.9. regulation 23A(15)(a) and (d);

87.1.10. section 93(1) and (2) read with regulation 30; and

87.1.11. section 133(1) and (2) read with section 90(2)(l).

87.2. The first respondent contravened section 52(5)(d) of the NCA.

87.3. The respondents’ contravention of the above-mentioned sections of the NCA is prohibited conduct in terms of section 150(a) of the NCA.

87.4. The respondents have brought the credit industry into disrepute and acted with disregard for consumers’ rights generally.

87.5. The agreements identified in the applicants’ investigation report were granted recklessly.

87.6. The respondents are interdicted from collecting on any credit agreements found to have been extended recklessly.

87.7. The respondents are ordered to immediately return consumer instruments that were not found during the execution of the search warrant to their rightful owners or to immediately hand over such instruments to the SAPS.

87.8. The respondents must refund any amounts charged and recovered from consumers over and above the initial loan amounts or refund all identified consumers captured within the samples or the police inventory annexed to the applicant’s investigation report any amounts charged and recovered over and above the initial loan amounts.

87.9. The respondents must pay jointly and severally, one paying for the other to be absolved, an administrative fine 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: Sunnyside

Branch code: 010 645

Account number: 3[…]

Reference: NCT/318855/2024/140(1)

88. There is no order as to costs.

Thus, done and dated 1 July 2024.

Dr A Potwana (Tribunal Member)

Mr S Mbhele (Presiding Tribunal Member) and Mr S Hockey (Tribunal Member) concur.

[1] Regulations for matters relating to the functions of the Tribunal and Rules for the conduct of matters before the National Consumer Tribunal Published under GN 789 in GG 30225 of 28 August 2007.

[2] Section 1 of the NCA provides that “prohibited conduct” means an act or omission in contravention of the NCA.

[3] Published under GN 513 in GG 39981 of 11 May 2016.

[4] Published under GN R489 in GG 28864 of 31 May 2006 as amended by GN R202 in GG No. 38557 of 13 March 2015.

[5] Regulation 39(2) of the NCA Regulations states – ““short term credit transaction" (a) means a credit transaction (i) in respect of a deferred amount at inception of the agreement not exceeding R8, 000; and (ii) in terms of which the whole amount is repayable within a period not exceeding 6 months; and (b) in terms of which an amount of money was disbursed to the consumer, to be utilised at the sole discretion of the consumer, and (c) includes pawn transactions, (d) but does not include credit transactions in respect of which the agreement is conditional upon (i) the amount deferred being paid by the credit provider directly or indirectly to a person or juristic person that is related to the credit provider; or (ii) the amount deferred being paid by the credit provider to a person or juristic person other than the consumer, except where such condition is introduced by the consumer.”

[5] Regulation 39(2) of the NCA Regulations states – ““short term credit transaction"

(a) means a credit transaction

(i) in respect of a deferred amount at inception of the agreement not exceeding R8, 000; and

(ii) in terms of which the whole amount is repayable within a period not exceeding 6 months; and

(b) in terms of which an amount of money was disbursed to the consumer, to be utilised at the sole discretion of the consumer, and

(c) includes pawn transactions,

(d) but does not include credit transactions in respect of which the agreement is conditional upon

(i) the amount deferred being paid by the credit provider directly or indirectly to a person or juristic person that is related to the credit provider; or

(ii) the amount deferred being paid by the credit provider to a person or juristic person other than the consumer, except where such condition is introduced by the consumer.”

[6] (A509/2107) [2019] ZAGPPHC 956 (18 December 2019) at paragraph 48.