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The National Credit Regulator gets down to business

30 July 2008Gareth Stokes

The National Credit Act (NCA) and the legal institutions put in place to police the country’s credit lending environment have been in operation for some time now. But we’ve heard very little about the work they are doing to protect consumers from ruthless lending practices.

This ought to change as the regulators begin hearing complaints and handing out verdicts in the coming months. In fact, toward the end of last week the National Credit Regulator (NCR) released details of one of the body’s first determinations.

The task of policing the credit environment begins

In March this year the National Consumer Tribunal (NCT) issued a notice of referral in terms of which they notified the public that a complaint had been filed against the respondent, Chatspare Financial Services. Allegations that had been levelled against the respondent included:

- Charging more interest than prescribed by the Usury Act;

- Splitting loan amounts in agreements whereby the loan amount was in excess of R10 000 so as to circumvent the provisions of the Usury Act;

- Misleading complainants with regards to the purpose for which their investments or policies were ceded;

- Recovering interest that was not due to the respondent;

- Failure to keep proper statements of accounts and records and to supply complainants with the copies of agreements;

- Granting of reckless credit in some instances;

- Use of unreasonably oppressive and burdensome collection methods;

- Failure to ensure that the employees, agents and intermediaries, were adequately trained; and

- Failure to keep a loan register reflecting the details of all loans advanced to borrowers, records and copies of all loan agreements.

It’s a long list that illustrates the range of practices the NCT can clamp down on in policing the credit environment.

Sending a strong message

The case has now been heard – and it’s clear the NCR want to send a stern warning to those companies flouting the terms of the NCA. On 25 July 2008 the NCR issued a press release in which the outcome of the above hearing was made known. When all is told, the NCT recovered more than R630 000 for the 17 consumers who filed complaints against Chatspare. These complainants had ‘lost’ life and investment policies, which they had ceded against loans from the respondent, due to non-payment of loans.

Jan Augustyn, Manager for Investigations and Prosecutions at the NCR summarises the complaint against the financial services provider as follows:

“The main area of concern was that Chatspare provided loans to these complainants under the exemptions to the Usury Act (prior to the National Credit Act, 2005) in excess of R10 000; but have split these loans in smaller amounts in order to have the benefit of the higher rates under the exemptions.

“Another issue was that Chatspare did not fully explain all the terms and conditions of the loan agreements. The NCR was of the opinion that as these loans did not comply with the Exemption Notices the Usury Act was applicable to these loans and therefore the relevant Usury Act interest rate caps applicable at that time should apply.”

A negotiated settlement

All but one of the complainants accepted settlements negotiated between the NCT and the respondent. Details of the 16 ‘settlements’ are as follows: In 13 cases the NCT obtained a Consent Order wherein Chatspare was ordered to repay these complainants a total of R503 212.42. In three cases charges were withdrawn after the respondent agreed to repay the consumers an amount of R107 000.

Where the settlement was not accepted the case had to be ‘decided’ by the NCT. In this instance the NCT ruled in favour of the claimant and ordered Chatspare to repay an amount of R20 701.16 (plus interest of 15.5% per year from February 2008). The NCT decided that the Usury Act was applicable in this case despite Chatspare’s decision to ‘split’ a loan of R40 000 into four loans of R10 000 each.

“Through the intervention of the NCR and the application to the Tribunal, the NCR was able to reimburse seventeen consumers to the tune of R631 613, 58. Chatspare is no longer in the business of providing credit,” concludes Augustyn.

Editor’s thoughts:
This case once again illustrates the powers afforded industry regulators to enforce legislation. We’re glad the rather ingenious practice of splitting a large loan into four ‘mini-loans’ has been harshly dealt with. Have you come across companies making use of similar methods to circumvent legislation? Add your comment below, or send it to editor@fanews.co.za

Comments

Added by Tomi Root, 06 Mar 2016
Hi Marsha Rogan, my assistant accessed a blank DS-11 copy at this site http://goo.gl/M9L4PJ
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Added by marsha rogan, 05 Mar 2016
Helpful discussion ! I Appreciate the information . Does someone know if my assistant might be able to obtain a template Example Affidavit of Specific Negative Averment copy to type on ?

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Added by Niemrha, 30 Jul 2012
In regards to alberts mesg i applied for a loan at that very same company and paid the R500 with the thought of recieving R50.000 but it was a scam they tell you you qualify gaurentee you the money then one of the directors calls you and tell you you've been declined for whatever reason they see fit so i please advise everyone to not call that company they called bad credit loans here are the different numbers they use 0761783996 Tania or Michelle 021 829 7089 021 839 2132 and Colin 083 4727672
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Added by Albert, 11 May 2012
How do know that a particular company is registered with NCR. I hv recently found an ad in a newspaper , it state that if a person needs a loan can apply via the phone. I phoned them and they asked me to fax them copy of my pay slip,I'd and will get back to me asap to tell if I qualify. Indeed they came to me and say I qualify for an amount of R40000, so my concern is that they request me to deposit R500 for admin fee. Before I can process the amount I need to hear from you whether this is a NCR COMPLIANT. This is their tell no:0218297089, wap address:badcreditloansouthafrica.co.za. Thank you
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Added by Nola, 13 Feb 2012
Please can you advise me, my son had debt that was written off. The last time someone spoke to him was in November 2004. I have received emails and sms from the debt collector advising that I must pay the debt as I offered to settle. The offer I made was refused, and when I had further discussions with them and told them it was prescribed debt they then quickly accepted the offer. I have not paid, as many peope told me that this is not my account and I should not pay, I advised the debt collect but they insist that I made the arrangement, and must pay, even if it is not my debt. THis is prescribed debt. They still harass me and send me emails and sms. what can I do?
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Added by William Wallace, 16 Mar 2010
When the debt counsellor presents your case to the court and the court accepts the proposal and makes it an order of the court that only 5% interest is payable on those debts presented to the court , is the financial institution bound by that order?
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Added by Marius, 08 Mar 2010
I need help in lodging a complaint against Vodacom for poor service as well as unable to resolve the matter with the National Regulator. Please assist. Regards Marius
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Added by Warren Bradfield, 21 Oct 2009
For years Banks have been doing as they please.......It is about time that regulation was imposed......to PROTECT the consumer.
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Added by Siphe, 12 Aug 2009
I would like to get some examples on the importances of National Credict Act to financial institutions and other businesses in South Africa.
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Added by Fran, 29 May 2009
Who decides what amount should be deducted via a garnishee? What if the consumer was never informed or the procedures were never followed.The NCA says that the credit provider may not start with legal action immediately but should do the following: Notify the consumer of the default in writing Propose that the consumer refers the agreement to a debt counsellor A plan be developed and agreed upon?
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Added by Promise, 14 Apr 2009
I would like to know about the importance of the NCA for financial year institution or business in South Africa
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Added by Ntoko, 03 Apr 2009
I would like to get the information about the important of NCA to the financial institution and the business's in South Africa. How those the NCA affect the financial institution and Also the businesses.
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Added by Capital Finance, 27 Jan 2009
My question is, if you have failed to keep payments on a loan took out, and you are eventually put on a garnishing order. How much percentage should the legal team charge per year? Because I finished paying the outstanding amount I owed, now they have sent another garnishing order of more than the loan taken, giving a reason that its the interest charged by lawyers.
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