Debtfree Magazine May 2018

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LEWIS VS NCR OVER CLUB FEES The National Credit Act and regulations set out very clearly what fees can and can’t be charged for credit accounts. In 2016, after a report from Summit Financial Wellbeing and in the wake of several similar investigations, the National Credit Regulator (NCR) had a look at Lewis Group’s club fees which they charge clients and said that they find them to be illegal. The NCR then referred the matter to the National Consumer Tribunal (NCT) who have authority to rule on such matters. The NCR asked the NCT to make Lewis pay back all their club fees to all their clients and fine the credit provider for breaking the law. After hearing arguments from both parties in 2017 the NCT ruled that the club fees charged by Lewis were not illegal. The NCT felt that Lewis had avoided mistakes that other credit providers may have made in regard to charging club fees and interest on these fees. The NCR then appealed the matter to the High Court as they want to see all club fees removed from the industry as the fees “increase the consumers’ cost of credit“.
HIGH COURT RULE AGAINST NCR The High Court in Pretoria heard the matter on appeal but eventually ruled against the NCR. The ruling was somewhat scathing against the NCR and will even award costs against the Regulator to try to discourage the NCR from repeating this type of application in the future. The Judge pointedly said that the NCR should have been well aware that they were not going to win the case as soon as they saw the credit provider’s replying affidavit (at NCT level). Part of the argument hinged around if consumers were forced to take the club membership in order to get access to credit. Lewis showed that less than a third of their clients had joined the club and this had not stopped any from gaining access to credit. The other half of the argument was about warranties which the NCR held to be pretty useless but Lewis was able to prove that they honoured, even when their own staff made some clerical errors. During the process in which the NCR showed 3 clients who were being incorrectly charged for insurance, Lewis conducted a massive internal investigation and decided to refund customers around R44 Million. This amount related to insurance fees which they discovered should not have been charged in regard to employment insurance (for example; insurance against being retrenched which may have accidentally been charged to a pensioner who was not employed). Also affected during the entire case at NCT and High Court has been Lewis Group shares which initially fell dramatically during the investigations and allegations. The High Court decision to issue costs against the NCR for the case was specifically made in an attempt to dissuade the Regulator from pursuing similar litigation.
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