Debtfree Magazine July 2017

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NCR Crack Down On Club Fees With fewer consumers gaining employment and entering the credit market, tighter restrictions on lending criteria, and ever increasing consumers defaulting on payments, the retail industry has been quietly raking in a fortune in customer club fees to help offset their reduced income. The National Credit Regulator (NCR) has recently launched a campaign to prevent credit providers from trying to charge fees in an unsanctioned way under the National Credit Act (NCA). In recent weeks, they have taken several credit providers to the National Consumer Tribunal (NCT) and asked for customer refunds, audits and fines. Investigations began back in 2015 and focused initially on insurance charges. As a result, several Tribunal cases were heard regarding charging insurance that
could never be claimed on. At the same time the NCR began looking at club fees and considered if credit providers were allowed to charge these fees under the NCA. The NCA and regulations has a simple list of things for which a credit provider may charge and the percentages they can charge for interest etc. So called Club fees are not mentioned. Several firms such as Edcon, Lewis and TFG (who own Totalsports and Foschini) have been hauled before the NCT. How You Sign Up Matters In the matter involving Edcon, a tick box was included on the credit application form for the club. The fees for the club were charge for through the credit providers store card. This caught the eye of the NCT who ordered that Edcon pay consumers back billions of Rands in fees since the NCA came into effect, or since Edcon changed their club fee application process in 2013. An audit was ordered to identify how much, but around half of all their clients have club membership and the 2016 club fees alone came to an estimated R590 000 000. Edcon are appealing the ruling. Lewis received an alternative ruling based on how they conduct the sign up process (they use a separate form) and calculate interest on their accounts. Lewis recently report making about R710 000 000 in ancillary services, and these may include the club fees they charge. The NCT however ruled in their favour and dismissed the matter. The NCR are appealing the ruling. TFG only contact customers about joining their club via their call centre, after the credit agreement is signed. This may protect it from a negative ruling at the NCT but time will tell. A large part of TFG’s club offering (other than competitions and insurance) is their club magazine. They currently are making around R400 000 000 (four hundred million) per annum from the magazine. If TFG did lose their case (and appeal which would automatically follow as Edcon have done) they could pay back an estimated R2.9 000 000 000 (two point nine billion) to consumers. If Edcon lose their appeal they could be forced to pay back an estimated R4.3 000 000 000 (four point 3 billion).
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