National Credit Regulator v Renene t/a Kwa-Whity and Another (NCT/321461/2024/140(1)) [2024] ZANCT 71 (5 December 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/321461/2024/140(1)

In the matter between: NATIONAL CREDIT REGULATOR APPLICANT and SOLULELE RENENE T/A KWA-WHITY 1ST RESPONDENT MANDIPHIWE RENENE T/A KWA WHITY 2ND RESPONDENT

Coram:

Mr S Hockey

- Presiding Tribunal Member

Ms Z Ntuli

- Tribunal member

Ms Manzi-Ntshingila - Tribunal Member

Date of Hearing - 2 December 2024

Date of Judgment - 5 December 2024

JUDGMENT AND REASONS

INTRODUCTION

The applicant in this matter is the National Credit Regulator (the applicant or the NCR), a juristic person established by section 12 of the National Credit Act, 34 of 2005 (the NCA). Part of the applicant’s mandate, as prescribed in the NCA, is to receive complaints of alleged contraventions of the NCA, monitor the consumer credit market and industry to ensure that prohibited conduct isdetected, prevented, and prosecuted, and investigate and evaluate alleged contraventions of the NCA.

1. At the hearing, the applicant was represented by Mr T Majoro, a legal advisor employed by the applicant.

2. The first respondent is Solulele Renene (the first respondent), who conducts a credit-granting business under the trade name Kwa-Whity.

3. The second respondent is Mandiphiwe Renene (the second respondent), who, like the first respondent, trades under the name of Kwa-Whity as a credit provider.

4. Both respondents are not registered as credit providers under the provisions of the NCA despite conducting business as such under the trade name Kwa- Whity.

5. Neither respondent filed an answering affidavit, nor did they attend or were represented at the hearing of the matter.

TERMINOLOGY

6. A reference to a section in this judgment refers to a section of the NCA.

7. A reference to a regulation refers to the National Credit Act Regulations, 2006[1] (the regulations). A reference to a rule refers to the Rules of the Tribunal.[2]

HEARING OF THE MATTER ON AN UNOPPOSED BASIS

8. The NCR sent the application to the first respondent by registered mail in terms of rule 30(1)(b) on 28 March 2024. The parcel containing the application was delivered to the first respondent on 31 July 2024.

9. The second respondent consented to the delivery of documents by email on 26 March 2024, and the application was accordingly served on her by email on 27 March 2024.

10. The Tribunal is satisfied that the application was duly delivered to both respondents, as was the notice of set down of the hearing by the Tribunal’s registry.

11. In terms of rule 13(2), the respondents had to file answering affidavits to the application within 15 business days of its receipt. Neither of them did so.

12. Under rule 13(5), any fact or allegation in the application or referral not specifically denied or admitted in an answering affidavit will be deemed admitted. Since no answering affidavits were received from the respondents, the factual allegations by the NCR are, therefore, deemed to be admitted.

BACKGROUND

13. The National Regulator for Consumer Specifications invited the NCR to participate in an operation aimed at consumer protection in the Eastern Cape. During the operation, the NCR scouted the area to identify persons trading as credit providers without registration and using prohibited methods to enforce credit agreements. During the informal monitoring exercise, the NCR’s investigations team received anonymous tip-offs from members of the community that a credit provider known to them as “Kwa-Whity” was operating in Qumbu, Eastern Cape, was conducting business as a credit provider and confiscating instruments such as identity

documents, identity cards, SASSA cards and bank cards of consumers to grant, collect and enforce credit agreements.

14. The NCR’s inspectors visited the Kwa-Whity premises and observed that no NCR window decal or registration certificate was displayed on the premises. The inspectors made an informal enquiry about the loan, and an employee of the respondents advised that they offered loans and retained instruments such as identity documents and bank cards to collect the amounts due under the credit agreements.

15. A further search on the NCR website revealed no registered credit provider under the respondents' names or trade names.

16. The above information led to the NCR forming a reasonable suspicion that the respondents were contravening the provisions of the NCA. Consequently, on 20 September 2023, the NCR initiated the complaint against Kwa-Whitey and authorised an investigation into its business practices in terms of sections 136(2) and 139(1)(c), respectively. An inspector was duly appointed to investigate the business activities of the respondents.

17. The inspector obtained a search and seizure warrant from the Qumbu Magistrate’s Court, entitling the search of the respondent’s premises and the seizure of any prohibited instruments, such as bank cards, identity documents, and SASSA cards.

18. The search and seizure warrant was executed at the respondents’ premises on 24 October 2023, during which 511 prohibited instruments, including identity documents, bank or SASSA cards, and a driver’s license, were found and seized. Subsequently, a criminal case was registered at the local police station.

19. During the execution of the search warrant, the second respondent, who was present at the time, provided the inspector with a brief overview of the respondents’ business, including that:

20.1. the owner of Kwa-Whity is the first respondent;

20.2. Kwa-Whity is not a registered credit provider;

20.3. the business was conducted through a registered company under the name NMW Finance;

20.4. Kwa-Whity has only one branch and commenced trading in January 2023;

20.5. the business extends short-term and unsecured loans ranging from R300.00 to a maximum of R3 000.00;

20.6. loans are extended to SASSA grant recipients, including pensioners and disabled persons, as well as child grant recipients;

20.7. Kwa-Whity request and identity document, three months' bank statements and the consumer’s latest payslips;

20.8. no pre-agreement statements or credit agreements were provided to consumers;

20.9. interest is charged at a rate of 30% per month; and

20.10. Kwa-Whity collects its instalments by making withdrawals from the consumers’ accounts using the SASSA and consumers' bank cards.

20. After the interview with the second respondent, the inspector linked thirteen copies of approved loan documents related to thirteen of the unlawful instruments found. These are attached as annexures “H1” to “H13” to the investigation report, which the inspector compiled and will be referred to as such.

THE CONTRAVENTIONS

21. The inspector's investigation report concluded that the respondents failed to operate their business in a manner consistent with the provisions of the NCA, as will be discussed under the sub-headings below.

Conducting a business as credit providers whilst not registered as such

under the provisions of the NCA.

22. Section 40(1) requires a person to 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 a threshold prescribed in terms of section 42(1). The latter section empowers the Minister to determine the threshold by notice in the Gazette. The Minister removed the threshold

requirement on 11 May 2016[3], whereafter, save for certain exceptions that are not applicable in this matter, all credit providers are required to register.

23. Section 40(3) prohibits a person who is required to be registered as a credit provider in terms of section 40(1) but who is not so registered from offering, making available or extending credit, entering into credit agreements or doing any of

these things.

24. In terms of section 40(4), any credit agreement entered into by a credit provider is required to be registered but is not so registered, is an unlawful credit agreement and void to the extent provided for in terms of section 89(2)(d). Section 89(5) obliges a court to make an order, including that such credit agreement is void from the date the agreement was entered into.

25. The evidence on record shows that the respondents are not registered as credit providers as required by section 40(1) despite extending credit to consumers. In the circumstances, the sections discussed above are applicable, and the credit agreements are unlawful and void. The Tribunal agrees with the submissions by the NCR that respondents, therefore, have contravened sections 40(1) and 40(3).

The unlawful retention of consumer instruments.

26. In terms of section 133(1)(a), a credit provider may not make use of any document, number or instrument referred to in section 90(2)(l) when collecting on or enforcing a credit agreement. The documents referred to in the latter section are identity documents, credit or debit cards, bank account automatic teller machine access cards, or any similar identifying document or device. These are the instruments that were referred to as prohibited instruments in this judgment. In terms of section 133(2), a credit provider may not use any of these instruments when seeking to enforce a credit agreement, nor may they use or rely on or permit the use of these instruments by any person when collecting money owed by a consumer under a credit agreement.

27. As stated above, 511 prohibited instruments were found on the premises of Kwa-Whity during the raid on 24 October 2023. The second respondent advised the inspector that they were using the bank and SASSA cards of consumers, which they retained, to collect or withdraw money from the accounts of the consumers concerned.

28. In the result of the above, the Tribunal agrees that the respondents contravened sections 133(1) and (2) read with section 90(2)(l).

THE RELIEF SOUGHT BY THE APPLICANT

29. The relief sought by the NCR is set out in its notice of referral and the founding affidavit. It includes a declaration that the respondents contravened sections 40(1), 40(3), as well as section 133(1), and (2) read with section 90(2)(l) and that such contraventions be declared prohibited conduct. Furthermore, the NCR seeks a declaration that all credit agreements concluded by the respondents in the preceding 3 years whilst not registered as credit providers are unlawful and void from the date they were entered into. Further relief sought comprises:

30.1. interdicting the respondents from collecting on or enforcing any part of the loans extended whilst they were not registered as credit providers;

30.2. an order that the respondents cease and desist from extending further credit whilst unregistered;

30.3. declaring that the respondents committed prohibited conduct by retaining prohibited instruments to enforce and collect on unlawful credit agreements;

30.4. an order directing the respondents to immediately return any prohibited instruments that they may still have in their possession to the consumers concerned;

30.5. an order that the respondents refund all the consumers identified in the investigation report;

30.6. an order for the appointment of an auditor by the respondents and at their expense to identify consumers they concluded credit agreements within the preceding three years and the amounts received by them and for the respondents to refund those consumers;

30.7. an order that the respondents immediately write off any outstanding loans not yet paid;

30.8. the imposition of an administrative fine of R1 million to be paid by the respondents jointly and severally; and

30.9. any other appropriate order to give effect to the consumers’ rights in terms of section 150(i).

30. Since the respondents contravened the provisions of the NCA as discussed above, some of the relief sought is warranted. However, the relief relating to the purpose of the appointment of an auditor and that relating to consumer refunds requires further consideration, which will be discussed below.

FURTHER DISCUSSION

31. During the hearing, members of the hearing panel questioned why the respondents were cited as parties in this matter as opposed to the company in which the second respondent alleged the business was being conducted. Mr Majoro argued that the evidence indicated that the two respondents conducted a business as credit providers.

32. The Tribunal considered the documents marked as H1 to H13 and noted that none of these documents refers to the company the second respondent mentioned.

33. The second respondent also mentioned that the first respondent was the business owner. On both occasions that the business premises were visited, the second respondent was in charge of the premises, and it is clear that she is instrumental in running the business.

34. In addition to the above, this application was served on both respondents, who elected not to oppose it. The allegations in the founding papers are clear that the two respondents are unlawfully conducting business as credit providers while they are not registered as such under the provisions of the NCA, as discussed above. Therefore, these averments stand uncontested and must be accepted to have been admitted in rule 13(5).

35. Under the above circumstances, the only reasonable inference is that the two respondents are indeed the parties who conduct the business under Kwa-Whity as credit providers.

36. A for the relief sought by the NCR, namely that the respondents be interdicted from collecting on or enforcing loans extended to

consumers, that they refund any consumers identified in the investigation report and those that may be identified by the auditor

to be appointed and that they write off any outstanding debts, these issues were discussed by the Constitutional Court in National Credit Regulator v Opperman and Others[4] (Opperman) and Chevron SA (Pty) Limited v Wilson’s Transport and Others[5] (Chevron). These cases dealt with the erstwhile provisions in sections 89(5)(b) and (c) which were declared unconstitutional. Before parts of section 89(5) were declared unconstitutional, it read as follows:

“If a credit agreement is unlawful in terms of this section, despite any provision of common law, any other legislation or any provision of an agreement to the contrary, a court must order that—

(a) the credit agreement is void as from the date the agreement was entered into;

(b) the credit provider must refund to the consumer any money paid by the consumer under that agreement to the credit provider, with interest calculated—

(i) at the rate set out in that agreement; and

(ii) for the period from the date on which the consumer paid the money to the credit provider, until the date the money is refunded to the consumer; and

(c) all the purported rights of the credit provider under that credit agreement to recover any money paid or goods delivered to, or on behalf of, the consumer in terms of that agreement are either—

(i) cancelled, unless the court concludes that doing so in the circumstances would unjustly enrich the consumer; or

(ii) forfeit to the State, if the court concludes that cancelling those rights in the circumstances would unjustly enrich the consumer.”

37. In Opperman, the Constitutional Court held that section 89(5)(c), prohibiting a credit provider from recovering money under an unlawful credit agreement, is unconstitutional as it results in the arbitrary deprivation of property in breach of section 25(1)[6] of the Constitution.

38. The erstwhile section 89(5)(b) provided that if a credit agreement was unlawful despite any provision of the common law, any other legislation or any provision of an agreement, the court had to order that the credit provider refund to the consumer any money paid by the consumer under that agreement to the credit provider with interest. In Chevron, the Constitutional Court opined that the deprivation under section 89(5)(b) is an even stronger case of deprivation than what was at issue in Opperman. The court held:

“That decision [i.e. Opperman] dealt with section 89(5)(c) of the NCA, which was very closely related to the section now before us. There, this Court found that taking away a credit provider’s legal remedies to recover monies paid by it to the consumer under a credit agreement constituted an arbitrary deprivation of property. Surely, if eliminating a credit provider’s ability potentially to recover money in the future is a deprivation of property, it follows more strongly that ordering the refund of money that a credit provider has already received is a deprivation.”[7]

39. The court further held:

“When dealing with an unlawful credit agreement, section 89(5)(b) enjoins a court to direct, in all circumstances, the credit provider to repay to the consumer all amounts paid under the credit agreement, together with interest. Being forced by an order of court or operation of law to part with payment already received from the consumer is the very essence of deprivation of property. And it is a substantial deprivation because Chevron is totally divested of the monies which it received under the credit agreement.”[8]

40. The rationales in the Opperman and Chevron matters remain relevant, as section 89(5) still requires a just and equitable order to be made in the case of an unlawful credit agreement. The Tribunal is mindful that the credit agreements entered into by the respondents are unlawful, resulting in their inability to claim the restitution of the loans under the agreements.[9] The Tribunal is also mindful that the orders sought by the NCR would prevent the respondents from taking action based on unjustified

enrichment.

41. The Tribunal is of the view that a just and equitable order would be one that would not deprive the respondents of their property rights in respect of the loan amounts. Instead, any order denying them any rights to other charges, such as interest and administrative costs, to the extent that these may have been required from the consumers. Where the consumers had paid any such charges, an order that these be refunded would be just and equitable.

42. To give effect to the orders alluded to above, it would be appropriate for an auditor to be appointed to identify consumers who may be entitled to the refunds and to determine their amounts.

ADMINISTRATIVE FINE

43. Given the seriousness of the respondents’ contraventions of the provisions of the NCA and the fact that they effectively circumvented the control measures of the legislation by extending credit to consumers whilst not being registered as credit providers, the Tribunal is of the view that the imposition of an administrative fine on them would be appropriate.

44. Section 151(1) empowers the Tribunal to impose an administrative fine regarding conduct prohibited by the NCA. Such fine may not exceed the greater of 10% of the respondent’s annual turnover during the preceding financial year of R1 000 000.00. Section 151(3) outlines the factors the Tribunal must consider when determining an appropriate fine. These are listed and discussed under separate sub-headings below.

a) The nature, duration, gravity and extent of the contraventions.

As stated above, the respondents circumvented the protective measures afforded to consumers under the NCA by extending loans whilst not being registered as credit providers. In addition, they retained prohibited instruments of consumers for purposes of collecting or enforcing loan repayments. They charge exorbitant interest rates of 30% per month, which is well above what is allowed in terms of the NCA's provisions. In these circumstances, the respondents’ conduct contravening the NCA is considered serious.

It is noted that the second respondent advised the inspector that they had been in operation only since January 2023. There is no evidence to the contrary, and this information is considered for the respondents' benefit.

b) The loss or damages suffered as a result of the contraventions.

The exorbitant interest rate of 30% per month to consumers is well over what is permitted under the provisions of the NCA and, therefore, caused significant loss to the consumers to whom the respondents extended loans.

c) The behaviour of the respondent.

The respondents' behaviour amounts to a disregard for the provisions of the NCA and the legislative protection granted to consumers under it.

d) The market circumstances in which the contraventions took place.

The respondent operated in a market where consumers are financially strained and most likely unaware of the rights afforded to them under the NCA. The respondents undoubtedly exploited these circumstances to the detriment of already impoverished consumers.

e) The level of profit derived from the contraventions

With an interest rate charged at 30% per month, which is well above what is permissible under the provisions of the NCA, the respondents must have derived a significant profit from the loan-granting activities.

f) The degree to which the respondent co-operated with the NCR

For the benefit of the respondents, it is noted that the second respondent cooperated fully during the investigation.

g) Whether the respondent has previously been found in contravention of the NCA.

The NCR submitted that no prior enforcement action had ever been instituted against the respondents.

45. In light of the above, the Tribunal is of the view that an administrative fine of R100 000.00 for each respondent is appropriate.

THE ORDER

46. In the result, the following order is made:

46.1. It is declared that the respondents contravened sections 40(1) and 40(3), as well as section 133(1) and (2) read with section 90(2)(l).

46.2. The above contraventions are declared prohibited conduct.

46.3. The credit agreements identified in the investigation report and all those concluded by the respondents whilst not being registered as credit providers under the NCA in the preceding three years from the date of this order are unlawful and void from the date of those purported agreements.

46.4. The respondents may not collect any interest or other charges over and above the loan amounts extended to consumers and may not claim any amounts in terms of and under the agreements that have been declared unlawful.

46.5. The respondents may not extend any further loans to consumers whilst they are not registered as credit providers with the NCR under the provisions of the NCA.

46.6. The respondents are ordered and directed to immediately return any prohibited instruments, as referred to in section 90(2)(l), that may still be in their possession to the consumers concerned.

46.7. The respondents are ordered to refund the interest and other charges charged and collected from those consumers identified in the investigation report within fifteen business days of the issuance of this order.

46.8. The respondents are ordered to appoint, within thirty business days of this order, an auditor who shall be a duly registered chartered accountant at their cost to identify those consumers to whom loans were extended by the respondents within the preceding three years of the issuance of this order whilst the respondents were not registered as credit providers and to whom interest and other charges were charged and collected, and the amounts of the interest and other charges. The auditor shall compile a report of their findings within three months of their appointment and submit a copy to the NCR. Upon completion of the auditor’s report, the respondents shall refund the interest and other charges to those consumers identified as having been so charged within thirty business days of the report.

46.9. The respondents shall immediately write off all outstanding interest and other charges over and above the loan amounts of consumers.

46.10. Within ten business days from the issuance of this order, the respondents shall each pay an administrative fine of R100 000.00 into the National Revenue Fund via the bank account of the Department of Trade, Industry and Competition, the details of which are as follows:

Bank:

Nedbank

Name of account: Department of Trade, Industry and Competition

Account number: 1[…]

Account type: Current account

Branch name: Telecoms and Fiscal

Branch code: 198765

Reference: NCT/321461/2024/140(1) and the name of the person or business making the payment.

46.11. There is no order as to costs.

(signed)

S Hockey (Presiding Tribunal member)

Tribunal members Ms Z Ntuli and Ms P Manzi-Ntshingila concur.

[1] Published under Government Notice R489 in Government Gazette 28864 of 31 May 2006.

[2] GN 789 of 28 August 2007: Regulations for matters relating to the functions of the Tribunal and Rules for the conduct of matters

before the National Consumer Tribunal, 2007 (Government Gazette No. 30225).

[3] Government Gazette 39981.

[4] 2013 (2) SA 1 (CC).

[5] 2015 (10) BCLR 1158 (CC).

[6] This section of the Constitution states that no one may be deprived of property except in terms of a law of general application, and no law may permit arbitrary deprivation of property.

[7] Chevron at para [19].

[8] Chevron at para [18].

[9] See Opperman para [15].