RESPONSIBLE USE OF CREDIT
The National Credit Regulator
Presentation to UNISA:DEPARTMENT OF MERCANTILE
LAW-BANKING LAW GROUP
Outline of the Presentation
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The mandate of the NCR in relation to Investigations.
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Who can investigate complaints?
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How investigations are initiated by the NCR?
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Types of enforcement actions that the NCR can take.
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The function and powers of the National Consumer Tribunal.
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Selected examples of complaints that the NCR has investigated, including
case studies.
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Conclusion.
The mandate of the NCR in relation to
Investigations and Enforcement
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In order to ensure that the purpose of the NCA (of promoting and
protecting the social and economic welfare of South Africans by
ensuring an equitable and accessible credit market) is fulfilled, the
NCR has been granted with the powers to enforce the NCA.
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Section 15 of the NCA specify the enforcement function of the NCA
and states that the NCR must enforce this NCA byInvestigating and ensuring that national and provincial registrants
comply with this NCA as well as conditions of registration.
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The mandate of the NCR in relation to Investigations
and Enforcement (Continued)
• Investigating
and
evaluating
alleged
contraventions of this Act;
• Negotiating and concluding undertakings and
consent orders contemplated in section 138(l)(b);
• Referring matters to the Tribunal and appearing
before the Tribunal,
• and issuing and enforcing compliance notices.
Who can investigate alleged non
compliance with the NCA?
• In order to conduct an investigation, a person must
be appointed by the CEO as either an Inspector or
an investigator.
• Only suitable persons employed by the NCR, or any
other suitable person employed by the State can be
appointed as Inspectors.
• Those not employed by the NCR or the State can be
appointed to conduct investigations, but they are
not Inspectors in terms of the NCA.
How investigations are initiated by
the NCR
• In terms of section 136 of the NCA, any person may
submit a complaint concerning an alleged contravention
of the NCA, OR
• The NCR may initiate a complaint in its own name.
• Once a complaints has been accepted or initiated in
terms of section 136, the NCR is empowered in terms of
Section 139 to direct an inspector to investigate the
complaint as quickly as practicable, and may also
designate one or more persons to assist the inspector
conducting the investigation.
How investigations are initiated by the
NCR (continued)
• All investigations relating to complaints lodged by
any person are classified as re-active
investigations.
• All investigations relating to complaints initiated
by the NCR are classified as pro-active
investigations.
Enforcement Actions
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Once a compliant has been investigated, and evidence indicates that
there has been non-compliance with the NCA, the NCR can take any of
the following actions:
The NCR can either issue a notice of compliance to the transgressor.
Consent orders can be negotiated and entered into between the NCR and
the transgressor.
The NCR can also refer the matter to the Tribunal for adjudication and
appropriate orders.
The NCR can also refer the matter to the High court for appropriate
relieve.
The NCR can also refer the matter to the NPA or the South African Police.
Enforcement Action
• Compliance notices provides the NCR with
quasi-judicial powers in that the NCR is able to
objectively determine facts and draw
conclusions from these facts, and ultimately
impose instructions to remedy a situation or
impose legal penalties, and may affect the legal
rights, duties or privileges of specific parties.
The function and powers of the
National Consumer Tribunal.
• The National Consumer Tribunal (NCT) plays an important role when
it comes to enforcing the NCA.
• Juristic person and has jurisdiction throughout the country
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Adjudicate in relation to any contravention of the Act
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Order of the Tribunal has same status as high court (single Judge)
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NCT is a creature of statute and can only perform functions
specifically authorized by the NCA
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Tribunal cannot declare contracts unlawful.
The function and powers of the
National Consumer Tribunal.
• The NCT may impose an administrative fine.
• The NCT may declare a particular conduct to be prohibited
conduct in terms of the NCA.
• The NCT may order that excessive charges/costs be refunded
to consumers.
• The NCT may order cancellation of registration of the
Respondent.
• The NCT may also order an interdict against the prohibited
conduct.
Selected examples of complaints that the
NCR has investigated.
• The NCR had investigated all aspects relating to credit
agreements:• Unlawful advertisements of credit.
• Reckless lending.
• Excessive or prohibited costs of credit, e.g. charging interest
above the rate allowed by the NCA.
• Unlawful provisions in a credit agreement.
• Illegal collection methods, e.g. retention of grant holders cards
and/or ID books.
• Entities that fail to register with the NCR when required to do so
by the NCA.
CASE STUDIES:CREDIT CARE
• An Application was launched at the National Consumer
Tribunal by the NCR against a credit provider known as
Credit Care.
• The NCR alleged that Credit Care contravened the Act
and Regulations and sought the cancellation of Credit
Care as a Credit Provider as well as an administrative
fine. The alleged violations were as follows:
CASE
STUDIES:CREDIT
(Continued)
CARE
– Contravention of Section 91(a) of the Act in that Credit Care induced
Consumers to sign supplementary agreements that contained unlawful
provisions- Credit Care induced Consumers to sign supplementary
agreements which contained provisions of additional charges which
charges were prohibited in terms of the Act.
– Contravention of Section 90(2)(b)(i) and (ii) of the Act in that Credit Care
required Consumers to sign credit agreements with unlawful provisions
depriving Consumers of certain rights enshrined in the Act. Consumers
were prevented from including the debt incurred under the credit
agreement under debt review or administration.
CASE STUDIES:CREDIT CARE (Continued)
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Contravention of Section 101(1)(d)(i) and (ii), 102 and 105 read
with Regulation 42(1) and 44 of the Act in that the Credit Care
split loans in order to obtain additional fees from Consumers. As
a further consequence Consumers were charged interest in excess
of the prescribed maximum rate.
Contravention of Section 100(1)(d) in that Credit Care charged
Consumers additional Nu-Pay fees. Such a fee is not listed as
one of the costs for credit and is thus prohibited in terms of the
Act.
Contravening Section 89(2)(a)(ii) of the Act in that Credit Care
granted credit to Consumers under administration without consent
of the Administrator.
CASE STUDIES:CREDIT CARE (Continued)
Contravening Section 92(1) and 92(3)(a) read together with
Regulation 28(2) of the Act in that Credit Care failed to furnish
Consumers with pre-agreement statements and quotations. In
addition to the aforesaid the credit agreements utilised by the
Respondent does not comply with Form 20.2 as fees as well as
interest charged are not disclosed.
NCT found it suitable to grant admin fine in the amount of 10% of
the annual turnover and to also cancel Credit Care’s
registration as a Credit Provider.
CASE STUDIES: BARKO
• The NCR issued Barko (a credit provider), with a compliance notice,
after an investigation conducted by the NCR revealed that Barko
contravened the Act.
• The contravention identified was that Barko directly or indirectly
required or induced Consumers to enter into a supplementary
agreements or sign documents that contain provisions which would
be unlawful if it were included in a credit agreement.
• The supplementary agreement required consumers to pay a fee
called NuPay fee, which was an additional fee over and above the
service fee that consumers were required to pay in terms of the
credit agreement.
Barko (continued)
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The NuPay fee was a fee due and payable to an entity known as NuPay (Pty)
Ltd- which was a service provider that rendered various services to Barko.
The services rendered by NuPay included the management and processing
of loan repayments due and payable by consumers to Barko in terms of the
credit agreements entered between Barko and consumers.
By inducing consumers to pay the NuPay fee, Barko contravened Section
90(1) read with Section 90(2)(a) or (b), Section 100 (1) (a) read with Section
101 (1) (NuPay fee not one of the permissible fees in terms of the Act, OR
Section 100 (1) (b) read with Section 101 (1) (c ) and 105 (1) (b) and
Regulation 42 ( NuPay fee exceeded to maximum amount of service fee
allowed by the Act).
Barko (continued)
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The Compliance Notice required Barko to repay to consumers the
amount of NuPay fees that consumers paid to Barko.
Barko launched an Application at the NCT, objecting to the
Compliance Notice and requesting the Tribunal to set aside the
Compliance Notice.
The main issue that was raised by Barko in the objection Application
was that the NuPay agreement that required consumers to pay the
NuPay fee, was not part of Barko’s credit agreement, but that it was
an independent agreement between NuPay and the consumers.
The NCT dismissed Barko’s application and confirmed the
Compliance Notice.
CASE STUDY: Wonga
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The NCR issued a Compliance Notice to Wonga- a credit provider,
after an investigation revealed that Wonga contravened various
provisions of the Act.
The contraventions revealed were the following:
– Wonga did not require proof of the consumer’s income and does
not require the consumer to provide supporting information or
documentation to verify the consumer’s financial means or
income- Wonga failed to take reasonable steps to assess the
consumer’s financial means in order to establish the consumer’s
ability to repay the credit applied for ( contravention of Section
81(2)(a)(iii) )
Wonga (continued)
– Wonga did not obtain proof of the consumer’s living expenses and
does not require the consumer to provide supporting information or
documentation to verify the consumer’s living expenses- Wonga
failed to take reasonable steps to assess the consumer’s financial
obligations to establish the consumer’s ability to repay the credit
applied for. (Contravention of Section 81(2)(a)(iii) )
– Wonga did not maintain and keep records of documentation in
support of the steps taken in terms of section 81(2) and those in
support of the steps taken after default by the consumer.
(Contravention of Section 170 read with Regulation 55(1)(b)(vi) and
(viii) )
Wonga (continued)
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– consents to judgment issued by and/or on behalf of Wonga to
consumers contains a clause which expresses, on behalf of the
consumer, consent to the jurisdiction of a court outside the area
of jurisdiction of a court having concurrent jurisdiction and in
which the consumer resides or works, which consent contains a
provision that would be unlawful if it were included in a credit
agreement. (Contravention of Sections 89(2)(c) and
90(2)(k)(vi)(bb) read with section 91(1)(a) )
Wonga was instructed to implement systems that will ensure that it
complies with the above mentioned provisions of the Act.
Conclusion
By investigating complaints and taking appropriate
enforcement actions where there is evidence of noncompliance with the NCA, the NCR able to comply with its
mandate of enforcing the Act and making sure that all
stakeholders conform to the provisions of the Act.
It is mainly through the Investigations and Enforcement
function of the NCR that predatory lending practices can be
combated.