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[2020] ZANCT 17
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National Credit Regulator v Fick NO and Another (NCT/99222/2018/140(1)) [2020] ZANCT 17 (28 October 2020)
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IN THE NATIONAL CONSUMER TRIBUNAL
HELD IN CENTURION
Case number: NCT/99222/2018/140(1)
In the matter between:
NATIONAL CREDIT REGULATOR Applicant
And
HELENA JOHANNA MARIA FICK N.O First Respondent
(In her capacity as Trustee of the HELMO Trust)
JOHANNES HENDRIK FICK N.O. Second Respondent
(In his capacity as Trustee of the HELMO Trust)
Coram:
Adv F Manamela - Presiding Member
Adv J Simpson - Tribunal Member
Mr A Potwana - Tribunal Member
Date of Hearing - 13 October 2018
JUDGMENT AND REASONS
INTRODUCTION
This matter has a long drawn out history dating back to December 2017 when the National Credit Regulator (NCR) commenced with the filing of the application at the Tribunal, following allegations of the Respondent’s repeated contraventions of the National Credit Act 34 of 2005 (the NCA) and the Regulations. The Respondents, Helena Johanna Maria Fick and Johannes Hendrik Fick, are trustees of the Helmo Trust, and have been appointed by the Master of the High court - Bloemfontein, to act on behalf of the Trust as nomine officii. Helmo Trust trades as Intra Finance Cash Loans and is registered with the NCR as a credit provider. This matter has seen many interlocutory applications from both parties, including the more recent “urgent” High court application by the Respondents, seeking the stay of the Tribunal’s hearing of this matter, pending a declaratory order of the High court. That application has since been struck from the urgent court roll. The Applicant approached the Tribunal in terms of section 140(1) of the NCA, for an order declaring the conduct of the Respondent, prohibited due to certain repeated contraventions of the NCA, its regulations and the conditions of registration. Specifically, the Applicant alleges that the Respondent entered into reckless credit agreements with consumers by failing to conduct affordability assessments when granting credit, alternatively, failing to keep records of steps taken when conducting affordability assessments; overcharging consumers interest on credit agreements concluded; and requiring consumers to enter into supplementary agreements or to complete documents that contain a provision or clause which will be unlawful if it were included in a credit agreement. This application comes before the Tribunal after the Applicant conducted routine compliance monitoring inspections of its registrants through its compliance department. In that process, the NCR became aware of the Respondent’s conduct which is allegedly in contravention of the provisions of the NCA.
THE PARTIES
1. The Applicant in this matter is the National Credit Regulator (NCR), a juristic person established in terms of Section 12 of the National Credit Act (the “NCA”) whose address is 127-15th Road, Midrand (hereinafter, “the Applicant”). The Applicant was represented by Mr R Stocker, a legal advisor in the employ of the Applicant.
2. The First Respondent is HELENA JOHANNA MARIA FICK N.O. (in her capacity as Trustee of the HELMO Trust). The Second Respondent is JOHANNES HENDRIK FICK N.O. (in his capacity as Trustee of the HELMO Trust). HELMO Trust is trading as Intra Finance Cash Loans and is duly registered in terms of the Trust Property Control Act of South Africa, with physical address at 34A Campbell Street, Barkly West, Northern Cape province, (hereinafter, “the Respondent”). The Respondents were absent at the hearing of this matter and did not send a representative.
3. The Respondent registered with the Applicant in 2016 under NCR registration number NCRCP 686. The NCR registration records show that the Respondent’s status is still active. In this judgment, we will for purposes of convenience refer to, Respondent or Intra Finance.
APPLICATION TYPE AND THE RELIEF SOUGHT
4. This is an application in terms of section 140(1) of the National Credit Act, Act 34 of 2005 (“the NCA”) for an order in the following terms:
4.1. declaring the Respondent’s contravention of the following sections of the NCA –
4.1.1. Section 81(2) read with regulation 23A;
4.1.2. Section 80(1) read with section 81(3);
4.1.3. Section 170 read together with regulation 55(1)(b)(vi);
4.1.4. Section 101(1)(d)(ii) and Regulation 42(1);
4.1.5. Section 100(1) (a) and section 100 (1)(d);
4.1.6. Section 91(a) and section 101(1)(c), read with regulation 44
4.1.8. Declaring such repeated contraventions of the above provisions to be conduct prohibited in terms of section 150 (a) of the NCA; and
4.1.9. Declaring that the Respondent is interdicted from conducting any further activities as a credit provider;
4.2 declaring credit agreements to have been extended to consumers recklessly, in the event of the Respondent failing to conduct proper affordability assessments. An independent auditor to be appointed to identify all open loans to determine if proper affordability assessments were conducted and/or whether or not the loans granted to consumers were extended recklessly. The Tribunal to set aside all such identified loans deemed to be reckless and to set aside consumers’ rights and obligations under those agreements;
4.3 ordering the Respondent to, within 30 days from the date of judgment, appoint an independent auditor at its own cost - to determine and compile a list of all the consumers who were overcharged on fees, amounts of charges; to refund the amounts it received in the form of fees and charges, which it was not entitled to receive, of which exceeded the prescribed maximum amounts allowed by the Act, to each of the consumers within 30 days from the date of the auditor’s report. Once a refund has been made, the Respondent to submit within 120 days, a written report to the Applicant detailing the identity of consumers affected by the Respondent’s conduct and the refunds made. The funds intended for any consumer who the Respondent was unable to trace and repay, shall be paid into a Trust Account held by the Auditor;
4.4 imposing an administrative fine in the amount of R1 000 000 on the Respondent, or 10% of the Respondent’s annual turnover, whichever is greater; and /or
4.5 granting the Applicant any other appropriate relief the Tribunal may make under section 150 (i) to give effect to the consumers’ rights in terms of the NCA.
BRIEF FACTUAL BACKGROUND
5. This referral to the Tribunal originates from routine compliance monitoring inspections conducted by the Applicant for purposes of ensuring compliance with the NCA. In the process, the Applicant became aware of certain conduct by the Respondent which made the Applicant to believe that the latter was engaged in conduct in contravention of the NCA. The Applicant then initiated an investigation in terms of section 136(2) of the NCA, in its own name, and appointed Inspectors to carry out the investigation.
6. The Applicant then took a sample of ten credit agreement files from the Respondent, and discovered certain repeated contraventions of the NCA in the following terms-
6.1 failing to conduct affordability assessments;
6.2 overcharging consumers excessive interest in that the Respondent charged interest exceeding the prescribed maximum amounts allowed by the NCA;
6.3 failing to keep records of steps taken when conducting affordability assessments; and
6.4 requiring consumers to enter into supplementary agreements or to complete documents that contain a provision or clause which will be unlawful if it were included in a credit agreement.
ISSUES TO BE DECIDED
7. This matter was set down for hearing by the Tribunal on the basis that the parties were ready to proceed, having filed their answering and replying affidavits. Strangely, neither the Respondent, nor its legal representative, turned up for the hearing, and no reasons were provided for their absence. The Applicant informed the Tribunal that it received correspondence from the Respondent’s attorney, advising of its withdrawal from the case. The Tribunal is satisfied that the Respondent had been properly notified of the date, time and venue of the proceedings; and that the Respondent had been served with the set down notice. In that regard, the Tribunal proceeded to hear the matter in the absence of the Respondent[1]. However, the Tribunal still considered all the arguments raised in the Respondent’s answering affidavit when drafting the judgment.
8. The Applicant seeks an order from the Tribunal to declare certain conduct of the Respondent as prohibited conduct due to repeated contraventions of the NCA; and also, to direct the Respondent to refund consumers, the fees that are not allowed by the NCA. However, the Applicant abandoned the issue of the Respondent overcharging consumers excessive interest; and the prayer that the Respondent be interdicted from conducting any further activities as a credit provider. These two issues will not form part of this judgment (underlining for emphasis only).
9. The Applicant further requests the Tribunal to also decide whether or not on a finding of prohibited conduct, it should impose an administrative fine of R1 000 000[2] on the Respondent, on account of those contraventions;
10. The Respondent raised preliminary issues which the Tribunal will dispose of first and make a ruling on, incorporating such ruling in the body of this judgment.
Points in limine raised by the Respondent
11. In its answering affidavit deposed to by Helena Johanna Maria Fick, the Respondent raised some technical legal argument by making the following submissions which may be summarised as follows:
- Non joinder or misjoinder: in that the Applicant ought to have cited the trustees of Helmo Trust individually in their representative capacities, and not the Trust, as the latter does not have a separate legal personality; and cannot be sued in its own name. The Trustees ought therefore to be cited eo nominee;
- Due administrative process not followed: in that the Applicant did not have a reasonable suspicion to institute an investigation against the Respondent on allegations of prohibited conduct. According to the Respondent, the Applicant did not follow due process to initiate the complaint in its own name, and its findings in the investigation are inadmissible. Further that the Applicant failed to comply with the rules of natural justice and aspects of procedural fairness in the exercise of its administrative powers, in that the Respondent was not given any opportunity to address any of the complaints the Applicant had against it, or to respond to the findings of the investigation it conducted against the Respondent. Further, that the Respondent was not given the opportunity to resolve any alleged non-compliance of the NCA. The Respondent asserts that the Applicant, notwithstanding the Respondent’s cooperation during the investigation, displayed a rigid and uncompromising attitude by pressing ahead to have this matter heard by the Tribunal. Accordingly, the Respondent asks the Tribunal to dismiss this application with costs on grounds that the complaint, investigation and/or referral of this matter is invalid; and that the Tribunal lacks jurisdiction to hear this matter.
APPLICANT’S SUBMISSIONS
12. In countering the Respondent’s points raised in limine, the Applicant made the following averments in reply:
Non-joinder or misjoinder:
12.1 the Applicant amended its papers in April 2019 by way of an application, which the Respondent consented to, the effect of which amendment replaced the citation of the HELMO Trust with the two Respondents in their official capacities as the trustees of Helmo Trust. The non-joinder, according to the Applicant is no longer applicable, as it had, for the purposes of this application, become moot.
Due administrative process not followed:
12.2 the Applicant contended that the process followed was the correct one in that the investigation report was prepared on 30 September 2016, after the investigation was carried out, making it blatantly obvious that the findings in the report were not the source of the reasonable suspicion, and that the contents of the investigation report did not give rise to the reasonable suspicion which resulted in the investigation. The Applicant further asserted that in practice, the Applicant receives information by way of a complaint or through a compliance monitoring exercise, creating a reasonable suspicion which then gives rise to the investigation, culminating into the Inspector preparing the investigation report. The Applicant refuted the Respondent’s claim that its findings are fatally flawed and that such bald and unsubstantiated allegation cannot vitiate the Applicant’s investigation and referral process;
12.3 the Applicant asserts further that it is under no obligation to notify a credit provider of a complaint being initiated against it, or to give a credit provider, and in this regard, the Respondent, the opportunity to address any of the complaints. The Respondent, by virtue of being a registrant, is obliged and in fact expressly undertakes when it registers as a credit provider, to allow the Applicant access to conduct wide ranging compliance monitoring exercises. The rules of natural justice obtain in proceedings before the Tribunal where the parties get the opportunity to ventilate their issues.
13. In response to the balance of the Respondent’s submissions in the answering affidavit regarding the declaratory order seeking to stay the Tribunal’s hearing of the matter; and the inducement of the consumers, the Applicant made the following averments:
13.1 the declaratory order sought in the pending High court does not usurp the Tribunal’s jurisdictional powers to hear this matter. Referring to the Supreme Court of Appeal matter of Barko Financial Services (Pty) Limited v National Credit Regulator and Another[3], the Applicant asserted that the court confirmed the decision of the North Gauteng High Court when it decided an appeal concerning consumers paying service fees in excess of the maximum amount prescribed by the NCA, pursuant to a supplementary agreement the consumers were induced to enter into, as well as the power of the Tribunal to order the repayment of excess fees charged, flowing from such supplementary agreements;
13.2 the Applicant opposed the submission by the Respondent that the Tribunal is not empowered to adjudicate this matter on the alleged contraventions mentioned in their founding papers. The Applicant argues, the Tribunal is a specialist body established for the express purpose of adjudicating issues of interpretation of the NCA, and thus an appropriate forum of first instance to deal with these issues, whose decisions may be appealed or taken on review by the High Court. Further, that the Respondent’s argument on the pending High Court declaratory application is intended to stall the matter and to circumvent or avoid these proceedings, based on hypothetical scenarios , and for that matter, for no good reason;
13.3 even though the Respondent’s assertion that there are numerous uses and benefits of the “electronic payment instructions” which Intercon provides, in reality and within the context of the specific consumers who purchase these “ services”, they do so for one reason- to facilitate the consumers paying their debt obligations to the Respondent. These consumers only take up these services because they are prompted to do so by the Respondent at the time of entering into the credit agreement;
13.4 the NCA expressly lists the fees that the credit provider can charge under a credit agreement; and anything not so expressly allowed, is prohibited. A credit provider cannot seek to circumvent what the NCA provides by either imposing the prohibited charge or fee in a separate document or agreement, or by structuring the transaction in such a way that, technically it is not the credit provider but a third party who recovers that charge. The charge or fee which the credit provider may recover is the service fee, the prescribed maximum amount of which is R60.00, which is intended to cover the costs of administering a credit agreement, including inter alia, the processing of payments. Intercon’s ALLPS charges form part of such service fee costs, in that it is a cost of administering the credit agreement. The Respondent, according to the Applicant, can recoup such costs from a consumer or allow the consumer to pay the service provider directly, but limited to the maximum amount of R60.00; and
13.5 the Respondent, by adding the Intercon fee to the monthly service charges, exceeded the maximum allowable cost of credit. The fact that consumers may have voluntarily signed the agreement, does not mean that the Respondent did not require or induce them to sign it, as it is evident that almost all the sampled consumers signed the Intercon agreement. According to the Applicant, this is a clear indication of inducement.
TRIBUNAL’S CONSIDERATION OF THE APPLICABLE LAW TO THE FACTS
POINTS IN LIMINE
14. The Respondent, in its answering affidavit, raised two points in limine in the main, and also answered ad seriatim to the Applicant’s allegations expressed in the founding papers. The Tribunal will firstly deal with the preliminary issues raised by the Respondent, and thereafter consider fully the submissions made by the parties:
POINT IN LIMINE: NON-JOINDER OR MISJOINDER
14.1 The Respondent raised this point on the basis that the Applicant ought to have cited the trustees of HELMO Trust in their representative capacities, and not the Trust, the latter being a legal institution with no legal personality. The citation issue was addressed by the Applicant in April 2019 when it filed an application for leave to amend its papers. The Respondent consented to the amendment of the citation replacing the Trust with the two trustees, who in subsequent papers were correctly cited as trustees representing the HELMO Trust in their official capacities. Effectively, the amended papers put to bed, this technical point. This issue cannot now be considered a material defence, as the parties had agreed to resolve it by amending the citation which was accordingly affected. This point in limine cannot be upheld; and
POINT IN LIMINE: DUE ADMINISTRATIVE PROCESS NOT FOLLOWED
14.2 The Respondent raised this point in three parts. First, that the Applicant did not have reasonable suspicion to institute the investigation; second, that the Applicant did not comply with due process to initiate the complaint in its own name, leading to the investigation; and third, that the Applicant failed to comply with due process in referring the matter to the Tribunal in that it did not apply procedural fairness as a requirement for just administrative process. The Respondent also claims that the Tribunal lacks jurisdiction to entertain this matter.
Jurisdiction
15. The Tribunal would first consider the issue of jurisdiction in order to clear the air, and later deal with the other issues raised by the Respondent in limine, in reverse order. Foremost, the Tribunal has jurisdiction to adjudicate this application on the strength of the referral in terms of section 140 (2) (b). It proceeded on the basis that the factual allegations by the Applicant were responded to by the Respondent when it filed its answering papers. This is an application in terms of section 140(1) of the NCA, which provides the following:
“(1) After completing an investigation into a complaint, the National Credit Regulator may-
(a) …;
(b) make a referral in accordance with subsection(2), if the National Credit Regulator believes that a person has engaged in prohibited conduct;”
16. Section 140 (2) (b) provides:
“(2) In the circumstances contemplated I subsection(10(b), the National Credit Regulator may refer the matter-
(a) …;
(b) to the Tribunal”
17. There is therefore no basis in law to challenge the jurisdiction of this Tribunal to entertain or hear this application. The Respondent’s assertion falls to be dismissed.
Failure to comply with due process to initiate the complaint in own name
18. Our courts[4] have held the view that the information obtained during the on-site compliance monitoring visit, is objective enough to create a reasonable suspicion that the Respondent might be in contravention of certain provisions of the NCA, leading the Applicant to initiate the complaint and conduct an investigation. The Applicant acted within the confines of the NCA and exercised its discretion by initiating the investigation and referring its findings to the Tribunal for adjudication. The courts also found that the memorandum the Applicant writes (on the basis of the monitoring report it had compiled); the request to appoint the inspectors; and the approval by the Regulator to initiate an investigation; was sufficient to initiate a complaint and the resultant investigation;
19. The Tribunal is satisfied that the Applicant followed due process when it conducted the on-site compliance monitoring visit where certain contraventions of the NCA were uncovered; initiated the complaint in the form of a memorandum; appointed the inspectors who made findings and compiled the on-site report; and ultimately conducted an investigation which led to the matter being referred and heard by the Tribunal, was a valid step to take, and the Applicant acted within the confines of its mandate. Again, the Respondent’s in limine point fails.
Procedural Fairness for Just Administrative Process
20. The Respondent contends that the Applicant did not exercise procedural fairness for just administrative process but does not go further to substantiate what process the Applicant ought to have followed. In the normal scheme of things, a registrant with the National Credit Regulator, submits itself under the control and supervision of the Regulator, when it registers as a credit provider, and signs the conditions of registration, which among others, expressly allows the Regulator access to the Registrant’s premises, books, documents, etc, as and when the Regulator needs to perform its function under the NCA. The Applicant’s assertion that it is under no obligation to define the scope of its investigation or to give the credit provider the opportunity to address any of the complaints, holds true. The process of initiating a complaint and the subsequent investigation and referral to the Tribunal must be distinguished from the Regulator’s issuance of the Compliance Notice where the alleged contravention by the Registrant may be less serious and can be cured through compliance with the notice. In instances such as this one before the Tribunal, the opportunity to answer happens at the Tribunal’s proceedings. In any event the Applicant has a discretion to follow any path it deems most appropriate in the circumstances, to execute its functions.
Lack of Reasonable suspicion [Belief that a Person has engaged in Prohibited Conduct]
21. The Applicant’s reliance on the on-site compliance visit report, is the basis for establishing that there was a reasonable suspicion of the Respondent’s contravention of the provisions of the NCA. The on-site visit uncovered information which justified the Applicant’s move to initiate the investigation based on the suspicion. Once such a suspicion had been formulated, the Applicant took a sample of files, and uncovered numerous contraventions of the NCA; confirming its suspicion that indeed the files did not contain the credit bureau reports; and also confirming that the Respondent failed to consider the consumers’ existing debt obligations when it extended credit to consumers. The Applicant had sufficient grounds to believe that prohibited conduct had occurred. The information obtained during the on-site compliance visit warranted the investigation and the referral to the Tribunal for adjudication. In Woodlands Dairy (Pty) Ltd and Another v Competition Commission[5] the court held:
“ A complaint has to be ‘initiated’. The commissioner has exclusive jurisdiction to initiate a complaint under s49B(1). The question then arises whether there are any jurisdictional requirements for the initiation of a complaint by the commissioner. I would have thought, as a matter of principle, that the commissioner must at the very least have been in possession of information concerning an alleged practice which, objectively speaking, could give rise to a reasonable suspicion of the existence of a prohibited practice. Without such information there could not be a rational exercise of the power. This is in consonant with the provisions of s49B(2)(a) which permit anyone to provide the commission with information concerning prohibited practice without submitting a formal complaint”
22. The decisions in Yara and Woodlands[6] provide the clear position of law regarding the basis for initiating a complaint based on reasonable suspicion. The NCA in s140 (1)(b) refers to the presence of ‘ belief ’ for the Regulator to refer the matter. However, the test is the same - there must have been some information leading to the Regulator to believe that a person is engaged in prohibited conduct;
23. On these and other grounds, the Respondent’s in limine points are dismissed.
THE TRIBUNAL’S FURTHER CONSIDERATIONS
24. One of the Respondent’s plea in the answering affidavit was that the Tribunal must stay these proceedings, pending the High court application to interdict these proceedings in the Tribunal, where a declaratory order is sought regarding the Intecon matter involving the Respondent and other parties. The date of the court hearing is not known. The matter has since been removed from the urgent court roll. The Respondent argues that the matter is still alive, and that the hearing on the normal motion roll is set for February 2019. This date is passed. The rest of the other issues raised in the so-called “declaratory order” submissions cannot, for the purposes of this judgment be entertained, as doing so, will become an academic exercise. Suffice to say, the Tribunal has met these challenges before and has appropriately dealt with them. The Tribunal is required in terms of section 142(1)(b) of the NCA, to conduct its hearings as expeditiously as possible. The “pending High Court matter application” has no material bearing on the Tribunal adjudicating this matter, and cannot for that reason, preclude it from proceeding.
25. In one of the earliest matters the Tribunal heard, Shosholoza Finance CC v National Credit Regulator[7], counsel for Shosholoza asked the Tribunal to postpone the main application because the proceedings in the High court would have a material bearing on the outcome of the main application. In its ruling, the Tribunal made the following observation: “ ….our courts have held that a court or a Tribunal should not easily divest itself of jurisdiction. Courts do not act on abstract ideas of justice and equity but must act on principle”[8]. In that matter, the Tribunal went further to state:
“ the NCR submitted that it would suffer prejudice because it was acting in the public interest, seeking to enforce the provisions of the Act and that such prejudice would not be addressed by an appropriate order of costs. The general principle for granting a postponement in South African civil law is that a party who applies for a postponement applies for an indulgence and must therefore show good cause for the interference with the other party's procedural right to proceed and the general interests of justice in having matters finalized. It lies within the court's discretion whether or not to grant the indulgence sought. Prejudice to either party must be taken into account. A postponement cannot be claimed as a matter of right despite an offer of an appropriate order as to costs. An application for a postponement must be made timeously as soon as the circumstances which might justify such an application become known to the applicant. Nor is the prospect of success in another forum in itself a sufficient ground for a postponement ”
26. The Tribunal dismissed the postponement application;
27. Likewise, in the current matter, the Tribunal holds the view that there is no legal basis upon which this matter cannot proceed. In any event the issue in dispute for which the Respondent ‘ seeks a declaratory order ’ was decided in favour of the Tribunal when the Supreme Court of Appeal in the Barko Financial Services (Pty) Limited v National Credit Regulator and Another,[9] held that the payment of service fees in excess of the maximum prescribed by the NCA, pursuant to a supplementary agreement and where consumers were induced to conclude such agreements, was prohibited conduct;
28. The Respondent attached an entire copy of the pleadings submitted in the High court matter relating to the Intekon dispute. It asked that the pleadings be regarded as part of the Tribunal pleadings. The pleadings and arguments made in the High court matter are specific to that matter and cannot be regarded as pleadings in the Tribunal case. There is no legal basis to submit that pleadings in a separate court can simply be inserted into the pleadings in another matter with similar issues in dispute. The opposing party is entitled to know exactly what must be responded to and what is relevant to the dispute. The High court pleadings are therefore not regarded as forming part of the Tribunal case.
ALLEGATIONS OF PROHIBITED CONDUCT ENGAGED BY THE RESPONDENT
29. At the outset the Tribunal is asked to make a finding on prohibited conduct against the Respondent, on allegations that the Respondent granted credit to consumers without first conducting affordability assessments as required by the NCA. The Tribunal has in the preceding paragraphs, dealt with the issue of supplementary agreements the consumers were induced to sign. The Applicant’s investigation report in annexures “C1 to C3 and C8 to C10” shows that the Respondent requires or induces consumers to enter into a supplementary agreement in the form of NAEDO Promissory Note. This note contains a provision for the payment of a service provider fee, which, when added to the service fee charged by the Respondent, causes the total service to exceed the maximum prescribed amount allowed or permitted by the NCA. A case in point is one of an adult male consumer, Mr Edwin Mogotsi, who had borrowed R3000.00 and was subjected to the NAEDO system which works as follows: The consumer signs the Pre-Agreement & Quotation for Small Agreements form, containing all the fees allowed by the NCA, including the charge of the monthly service fee of R50.00, being the prescribed maximum fee in terms of the NCA at the time. The monthly service fee has since been increased to R60.00.[10] At this stage everything seems to be in order, until on page 226 of the documents[11],where the same consumer is made to sign another document titled: “[N]AEDO PROMISSORY NOTE, ACKNOWLEDGEMENT OF DEBT AND AUTHORITY TO PROCESS PAYMENT INSTRUCTION AGAINST MY ACCOUNT”. Here, the Respondent charges the consumer a fee of R87.16 for Intecon Ref No: BF000146E40C. This document, completed in three parts, is a separate agreement from the pre-agreement document initially signed by the consumer where all the fees of a credit agreement are charged. By signing this agreement the consumer “acknowledges its indebtedness to, and undertakes to pay Intra Finance Cash Loans Barkly West and Intecon the payment amounts” indicated. On the face of it, the consumer is charged R50.00 (monthly service fee) plus R87.16 (Intercon NAEDO promissory note) both totalling R137.16. The consumer is over-charged by R87.16. This conduct by the Respondent is a contravention of section 91(2)[12] and section 101(1)(c), read with regulation 44 of the NCA. The Applicant canvassed this point adequately and the Tribunal is persuaded to agree with the submissions advanced by the Applicant;
30. By so doing, the Respondent, according to the Applicant, granted credit recklessly to consumers, in contravention of sections 81(2); 81(3) and 80(1)(a) of the NCA;
31. In the investigation report which the Applicant referred the Tribunal to, the annexures show that there were no credit bureau reports[13] which would have been considered for affordability assessments, nor did the Respondent attach any proof of such assessment in its answering affidavit. The Respondent undertook to show the Tribunal at the hearing, that such assessments were done. The Respondent never appeared at the hearing and did not produce any such evidence. In any event, such evidence would not have been part of the pleadings in this matter and would not have been considered by the Tribunal as it was not part of the Respondent’s answer to allegations levelled against it. The Respondent has thus contravened section 81(2)(a)(ii) and (iii) read with regulation 23A of the NCA;
32. The Applicant’s secondary allegation against the Respondent, relates to: Failure to keep records of steps taken when conducting affordability assessments. This contravention is cited in the alternative to the main charge of failure to conduct affordability assessments. It follows therefore that the Respondent must show / or prove that it kept proper records of those assessments, if at all it conducted affordability assessments. There was no evidence submitted by the Respondent to show that or refuting these allegations.
33. The Respondent failed to comply with the requirements of section 81(2) read with section 170 and regulation 55(1)(b)(vi) of the NCA. In summary these provisions of the NCA which the Respondent has contravened provide the following:
Section 80(1): “ a credit agreement is reckless if, at the time that the agreement was made, or at the time when the amount approved in terms of the agreement is increased, other than an increase in terms of section 119(4)-
(a) The credit provider failed to conduct and assessment as required by section 81(2), irrespective of what the outcome of such an assessment might have concluded at the time; or
(b) …..”
34. Section 81(2) and 81(3):
“ (2) A credit provider must not enter into a credit agreement without first taking reasonable steps to assess_
(a) the proposed consumer’s-
(i) General understanding and appreciation of the risks and costs of the proposed credit, and the rights and obligations of a consumer under a credit agreement;
(ii) debt repayment history as a consumer under credit agreements;
(iii) existing financial means, prospect and obligations
(b) …;
(3) A credit provider must not enter into a reckless credit agreement with a prospective consumer”
35. Section 170 provides that- “ A credit provider must maintain records of all applications for credit, credit agreements and credit accounts in the prescribed manner and form and for the prescribed time”
36. Prohibited conduct is defined in Section 1 of the NCA, as-
“…an act or omission in contravention of this Act, other than an act or omission that constitutes an offence under this Act, by – (a) an unregistered person who is required to be registered to engage in such an act, or (b) a credit provider, credit bureau or debt counselor.”
37. The Tribunal is satisfied that the conduct of the Respondent, meets the description of prohibited conduct. The Applicant has made out a case that the Respondent has engaged in prohibited conduct. The Tribunal is therefore competent to make a finding that the Respondent is in breach of the provisions of the NCA as articulated by the Applicant in the notice of motion. The Tribunal, however, makes no finding against the Respondent on allegations that it overcharged consumers on interest. During the hearing, the Applicant abandoned this prayer.
FINDINGS
38. The Tribunal, after considering the evidence before it, finds that the Respondent has repeatedly contravened the following provisions of the NCA and its Regulations:
38.1 Sections 81(2) read with Regulation 23A;
38.2 Section 80(1) read with section 81(3);
38.3 Section 100(1)(a) and 100(1)(d);and
38.4 Section 91 (2) and section 101(1)(c) read with regulation 44,
CONSIDERATION OF THE APPROPRIATE ADMINISTRATIVE FINE
39. The Applicant submits that the imposition of an administrative fine is justified in the circumstances of this case, regard being had to the seriousness of these repeated contraventions; the harm caused to unsuspecting consumers who suffered financial loss; and the fact that such conduct by the Respondent undermines the purpose of the NCA,
40. More pertinently is the conduct of the Respondent of not conducting affordability assessments, exposing the consumers to reckless lending and over-indebtedness.
41. Section 151(3) provides that, when determining the appropriate fine, the Tribunal must consider the following factors:
“(a) the nature, duration, gravity and extent of the contravention;
(b) any loss or damage suffered as a result of the contravention;
(c) the behaviour of the respondent;
(d) the market circumstances in which the contravention took place;
(e) the level of profit derived from the transaction;
(f) the degree to which the respondent has co-operated with the National Credit Regulator, or the National Consumer Commission, in the case of a matter arising in terms of the Consumer Protection Act, 2008, and the Tribunal; and
(g) whether the Respondent has previously been found in contravention of this Act, or the Consumer Protection Act, 2008, as the case may be.”
42. In NCR v Werlan Cash Loans t/a Lebathu Finance[14] the Tribunal stated the following in relation to the factors to consider when considering the imposition of an administrative fine: “When determining an amount, the Tribunal must consider the legislation from which its own mandate derives and consider the factors listed in Section 151(3).
43. We consider those factors briefly hereunder-
- The nature, duration, gravity and extent of the contravention:
considering the small sample of ten files the Applicant sourced from the Respondent, the nature and extent of the contraventions, as spelt out in the notice of motion, require serious action, in that the consumers were clearly exploited by the Respondent;
- Any loss or damage suffered as a result of the contravention:
the charges levied against the consumers in supplementary agreements exceed the prescribed maximum fees allowed by the NCA and are therefore prohibited. Consumers have suffered financial loss by paying excessive fees and were exploited by the Respondent, presumably due to their ignorance;
- The behaviour of the respondent:
there is no excuse for being unaware of the rules governing your game. There is a statutory obligation on the part of the Respondent to follow the letter, purpose and spirit of the NCA, the regulations and the conditions of registration;
- The market circumstances in which the contraventions took place:
these contraventions occurred under circumstances which the consumers were unsophisticated; vulnerable; unaware of their rights and responsibilities; were not properly assessed for affordability; and have been induced into signing supplementary agreements to their detriment and to the unjust benefit of the Respondent;
- The level of profit derived from the transaction:
once the Respondent charges prohibited fees that are not allowed by the NCA, there is some element of unlawful profit made. The Applicant did not provide evidence of the level of profit derived by the Respondent when excessive fees were levied against the consumers;
- The degree to which the respondent has co-operated with the National Credit Regulator:
the Respondent fully cooperated with the Applicant during the investigation; and
- Whether the Respondent has previously been found in contravention of this Act, or the Consumer Protection Act, 2008, as the case may be:
there is no evidence to suggest that the Respondent has previously been found to contravene the NCA, nor were there prior investigations or enforcement processes instituted against the Respondent.
44. The Applicant has made submissions in support of its request for the imposition of an administrative fine to be considered by the Tribunal as set out in Section 151(3). Generally, the Tribunal is not in a position to impose an administrative fine in the absence of evidence setting out the information as required by Section 151(3).
0cm; line-height: 150%">45. While the Tribunal is empowered by section 151 to impose an administrative fine of R1 000 000 on the Respondent under the current circumstances, it can impose a lesser fine if dictated to by the merits of each case and the circumstances obtaining at the time.
46. These contraventions are serious in nature and amount to prohibited conduct; It can be noted that the Applicant did not ask that the Respondent be de-registered as a credit provider.
47. The Respondent has conducted its business as a credit provider in a manner that is contrary to the provisions of the NCA and the regulations.
48. The Respondent has failed to conduct affordability assessments, thereby granting credit to vulnerable consumers, recklessly and exposing them to over-indebtedness.
49. In consideration of the above, the Tribunal finds that an administrative fine of R150 000.00 ( One hundred and fifty thousand rand) is appropriate in the circumstances.
ORDER
50. Accordingly, the Tribunal makes the following order:
50.1 The Respondent’s repeated contraventions of the NCA and the regulations is hereby declared prohibited conduct;
50.2 The Respondent is to pay an administrative fine in the amount of R150 000.00 into the National Revenue fund within 60 days of this judgement being issued. The National Revenue fund account details are as follows;
Bank- Standard Bank of South Africa, Account name - Department of Trade and Industry, Account number- 370650026, Account type- Business current account, Branch code- 010645 (Sunnyside), Branch code for electronic payments- 051001, Reference- NCT/122479.2018/75 (Name of depositor);
50.3. the Respondent is ordered to, within 30 business days after the issuing of this judgment, appoint an independent auditor, who is registered as a chartered accountant, at its own cost, who must determine and compile a list of all consumers who were overcharged on fees, or charges(where the monthly service charge plus the Intecon fee exceeds the maximum permitted value);
50.4 the Respondent must refund the excess amounts it received in the form of fees or charges, which it was not entitled to receive, or which exceeded the prescribed maximum amounts allowed by the NCA to each consumer within 30 business days from the date of the independent auditor’s report;
50.5 once the refunds have been made, the Respondent is further ordered to provide a written report to the Applicant, detailing the identity of the consumers and the refunds made. This report is to be provided to the Applicant within 120 business days after the order has been obtained;
50.6 the funds intended for any consumer who the Respondent was unable to trace and repay shall be paid into a trust account held by the independent auditor; and
50. 7 No order is made as to costs.
Dated and signed in Centurion on this, 28th Day of October 2020.
1. 000.00 ( One Million Rand ) payable by the Respondent to the A35.7 the Respondent is to pay the am
[SIGNED]_________________________________
FK MANAMELA
Tribunal Member
Adv J Simpson (Tribunal Member) and Mr A Potwana (Tribunal)
[1] Rule 24 (1)(b) of the Tribunal Rules. The Rules for the Conduct of Matters before the Tribunal.
[2] Or 10% of the Respondent’s annual turnover of the preceding year, whichever is the greater.
[3] 415/13 [2014] ZASCA 114, [2014] 4 All SA 41(SCA) 18 September 2014
[4] Competition Commission v Yara (South Africa) (Pty) Ltd and Others (784/12) (2013) ZASCA 107; 4 All SA 302(SCA)(6) 404(SCA)(13 September) para12. See also NCR v Xanadu Properties 117 CC trading as Cash in a Flash- NCT/21924/2015/57 (1) where the Applicant followed a similar procedure.
[5] (2010) (6) SA 108(SCA); [2011] 3All SA 192(SCA)(2010)ZASCA104: 105/2010 (13 September 2010)
[6] supra
[7] NCT/09/2008/57(1)(P) [2008] ZANCT 4 (6 October 2008]
[8] At para 12 of the judgment
[9] 415/13 [2014] ZASCA 114, [2014] 4 All SA 41(SCA) 18 September 2014
[10] Page 217, Annexure C1 of the bundle
[11] Annexure C1, PAGE 226
[12] The Applcant’s founding papers refer to section 91(a) which has since been amended.
[13] Annexure “C1” of the bundle of documents, pages 215-230
[14] NCT/3867/2012/57(1) [2013] ZANCT5 (13 February 2013)