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SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

 

IN THE NATIONAL CONSUMER

TRIBUNAL

 

HELD AT CENTURION

 

Case number: NCT/183002/2021/140(1)

 

In the matter between:

 

NATIONAL CREDIT REGULATOR                                                              APPLICANT

 

and

 

PARSONS HOME APPLIANCES CC

trading as

PARSONS FURNISHERS                                                                            RESPONDENT

 

 

Coram:

 

Mr T Bailey        –          Presiding Tribunal member

 Ms D Terblanche           – Tribunal member

Ms P Beck         – Tribunal member

 

Date of hearing – 18 January 2022 via the Teams digital platform

 Date of judgment – 8 February 2022

 

 

JUDGMENT AND REASONS

 

 

APPLICANT

 

1.                   The Applicant is the National Credit Regulator (the applicant), a juristic person established in terms of section 12 of the National Credit Act, 2005 (the Act) to regulate the consumer credit market and ensure compliance with the Act. The applicant’s principal business address is 127 - 15th Road, Randjespark, Johannesburg, Gauteng.

 

2.                   Mr Roy Stocker, a senior legal adviser in the applicant’s Investigations and Enforcement Department, represented the applicant at the hearing of this matter.

 

RESPONDENT

 

3.                   The Respondent is Parsons Home Appliances CC trading as Parsons Furnishers (the respondent), a close corporation registered in terms of the close corporation laws of the Republic of South Africa under registration number 1986/014952/23. The respondent’s registered address is 197 Du Toitspan Road, Kimberley, Northern Cape.

 

4.                   The respondent is a registered credit provider in terms of section 40 of the Act with registration number NCRCP2583.

 

5.                   Advocate J Jonker, a member of the Cape Bar, instructed by Duncan & Rothman Inc, represented the respondent at the hearing of this matter.

 

TERMINOLOGY

 

6.                   A reference to a section in this judgment refers to a section in the Act. A reference to a regulation refers to the National Credit Regulations, 2006 (the regulations).[1] A reference to a condition or general condition refers to the respondent’s registration conditions as a credit provider in terms of section 40 (the conditions).[2] Moreover, a reference to a form refers to a Form as prescribed in schedule 1 the regulations.

 

JURISDICTION

 

7.                   In addition to its other powers in terms of the Act, section 150 gives the National Consumer Tribunal (the Tribunal) the power to make appropriate orders concerning prohibited or required conduct in terms of the Act or the Consumer Protection Act, 2008. This power includes declaring conduct to be prohibited in terms of the Act; interdicting prohibited conduct; confirming an order against an unregistered person to cease engaging in an activity requiring registration in terms of the Act; requiring payment to the consumer of an excess amount charged together with interest set out in an agreement, or any appropriate order required to give effect to the Act.

 

APPLICATION TYPE AND THE RELIEF SOUGHT

 

8.                   This application is in terms of section 140 (1), which empowers the respondent after completing an investigation into a complaint to, amongst other things, make a referral to the Tribunal if it believes a person engaged in prohibited conduct[3].

 

9.                   The applicant sought orders declaring the respondent’s conduct as prohibited conduct in terms of section 150 (a) because it repeatedly contravened the Act and the regulations. It also sought orders interdicting the respondent from breaching the Act in the future, imposing an administrative fine on the respondent and granting remedial measures to affected consumers.

 

10.               The allegations of prohibited conduct and the detailed order the applicant requests in this matter will become apparent in this judgment.

 

PROCEDURAL BACKGROUND

 

11.               On 30 March 2021, the applicant filed this application with the Tribunal Registrar (the registrar). Later that day, the registrar issued a notice of filing. The respondent did not file an answering affidavit.

 

12.               Consequently, on 4 May 2021, the registrar issued a notice of set down for the hearing of this matter on 24 August 2021. On that day, the Tribunal granted the respondent’s request for a postponement to enable the respondent to apply to condone the late filing of its answering affidavit.

 

13.               On 21 October 2021, Tribunal condoned the respondent’s late filing of its answering affidavit. The applicant elected not to file a replying affidavit. On 10 November 2021, the registrar issued a notice setting this matter down for hearing on 18 January 2022.

 

FACTUAL BACKGROUND

 

14.               It is convenient to set out the parties material submissions that form the background to this matter.

 

Applicant’s submissions

 

15.               In October and November 2020, as part of its mandate to monitor the consumer credit market and industry, the applicant conducted a desktop compliance monitoring exercise on the respondent’s business. The monitoring exercise report, dated 23 November 2020, revealed that the respondent was likely committing prohibited conduct. Consequently, on 2 February 2021, the applicant initiated a complaint in terms of section 136 (2)[4] and authorised an investigation into the respondent’s business activities.

 

16.               On 9 February 2021, the applicant appointed Thembinkosi Sabela (Sabela) in terms of section 25 to

investigate the respondent’s activities.

 

17.               On 12 February 2021, Sabela held a meeting remotely via Microsoft teams with the respondent’s representative, Maria Parsons (Parsons), who provided an overview of its credit-granting policy. The respondent provided Sabela with 10 random consumer sample files (the sample files) concerning 10 credit agreements that the respondent concluded with consumers.

 

18.               Sabela compiled an investigation report (the investigation report) dated 5 March 2021.[5] The investigation report details the alleged contraventions. The 10 sample files are annexed to the investigation report to support the conclusions in the investigation report.[6]

 

Respondent’s submissions

19.               The respondent submitted that it is a respectable family-owned business, having conducted business in the furniture and small appliance industry for 40 years. Parsons, an elderly person and co-member of the respondent, primarily runs the business.

 

20.               The respondent conducts its business mainly on a cash basis. It advances credit to consumers from its funds. Consequently, it is in the respondent’s interest to advance credit responsibly and ensure that consumers can afford the credit and know their rights and obligations under the proposed credit agreements.

 

21.               The respondent does not hunt credit and grants credit mainly to reoccurring clients with proven track records. The sample files' low levels of bad debt and healthy state of the consumers’ accounts testify to the respondent’s responsible lending practices.

 

CONTRAVENTIONS OF THE ACT

 

Pre-agreement disclosure

 

Contravention 1: Failing to provide consumers with pre-agreement statements and quotations in the prescribed form and containing the prescribed content in contravention of section 92 (1) read with regulation 28 (1) and form 20

 

The Act

 

22.               Section 92 concerns pre-agreement disclosure. Section 92 (1) provides that a credit provider must not enter into a small credit agreement unless the credit provider has given the consumer a pre- agreement statement and quotation (the PAQ) in the prescribed form.

 

23.               Regulation 28 concerns PAQs for small agreements. Regulation 28 (1) provides that the PAQ given to a consumer under section 92 (1) must comply with the form and content set out in form 20.

 

Alleged contraventions

 

24.               The applicant alleged that the respondent’s PAQ, titled Pre-Approval and Quotation, failed to comply with form 20 because it did not contain all the prescribed content required in regulation 28 and form 20. It lacked the respondent’s full name, contact number, physical address and applicant’s registration number (the prescribed information) and a statement that the quotation was binding for five days.

 

Respondent

 

25.               The respondent conceded that the PAQ did not fully comply with form 20 because it omitted the prescribed information and statement. However, those details appeared on the invoice and the credit agreement the consumers signed. In addition, the respondent displays the applicant’s certificate in the store. Moreover, it has since rectified those omissions in its newly amended PAQ.

 

Analysis

 

26.               The respondent was correct to readily concede that its PAQ, as found in all the sample files, omitted the prescribed information and statement. Consequently, the respondent contravened section 92 (1) read with regulation 28 (1) and form 20.

 

Credit agreements

 

Contravention 2: Contravention of section 93 (2) read with regulation 30 (1) and form 20.2

 

The Act

 

27.               Section 93 concerns the form of credit agreements. Section 93 (1) requires the credit provider to deliver to the consumer a copy of a document that records their credit agreement. Section 93 (2) provides that a document that records a small credit agreement must be in the prescribed form.

 

28.               Regulation 30 (1) provides that the document must contain all the information reflected in form 20.2.

 

Alleged contraventions

 

29.               The applicant alleged that the respondent failed to provide credit agreements to the consumers in eight sample files. The respondent provided consumers with more detailed terms and conditions in

two sample files.[7] It still failed to comply with form 20.2 because the respondent’s full name and the

applicant’s registration number do not appear in the forms.

 

The respondent

 

30.               The respondent conceded that it failed to provide the consumers with credit agreements in seven sample files.[8] Although the first two pages of the credit agreement with the terms and conditions concerning the consumer were missing from the sample file,[9] the consumer would have signed them when concluding the credit agreement.

 

31.               The respondent denied that its name and registration number do not appear in two sample credit agreements.[10] The respondent’s stamped name and the applicant’s handwritten registration number appear below the Credit Provider heading in the credit agreements.

 

32.               The only omission is the reference to the respondent as a close corporation, which is immaterial because the consumers knew with whom they were contracting. Moreover, the respondent’s full name appears in its tax invoices to the consumers.

 

Analysis

 

33.               The respondent was correct to concede that it failed to provide the consumers with credit agreements in seven sample files. Its concession results in it having contravened section 93 (2) read with regulation 30 (1) and form 20.2.

 

34.               Given the respondent’s concession, it is unnecessary to make a finding concerning the other three sample files.

 

35.               The Tribunal turns to consider contravention 3.

 

Affordability assessments

 

Contravention 3: Failure to conduct proper affordability assessments in contravention of section 81 (2) (a) (ii) and (iii) read with regulation 23A

 

The Act

 

36.               Section 80 deals with reckless credit. An agreement is reckless under section 80 (1) (a) if the credit provider failed to conduct an agreement as required by section 81 (2), irrespective of what the outcome of such an assessment might have concluded at the time.

 

37.               Section 81 deals with the prevention of reckless credit. Section 81 (2) (a) (ii) precludes a credit provider from concluding a credit agreement without taking reasonable steps to assess the proposed consumer’s debt repayment history. Section 81 (2) (a) (iii) also requires the credit provider to take reasonable steps to assess the proposed consumer’s existing financial means, prospects, and obligations.

 

38.               Regulation 23A sets out the criteria for assessing affordability before granting credit. Regulation 23A (3) requires a credit provider to take practical steps to assess the consumer’s discretionary income to determine whether the consumer has the financial means and prospects to pay the proposed credit instalments.

 

39.               Regulation 23A (8) requires a credit provider to calculate the consumer’s existing financial means, prospects and obligations as envisaged in sections 78 (3) and 81 (2) (a) (iii).

 

40.               Regulation 23A (9) requires a credit provider to utilise the minimum expense norms table in regulation 23A broken down by monthly gross income when calculating the consumer’s existing financial obligations. The minimum expense norms table methodology set out in regulation 23A (10) requires a credit provider to determine the consumer’s gross income, statutory deductions, living expenses, and other existing debt and maintenance obligations. In addition, the credit provider must determine any other necessary expenses to calculate the discretionary income available to the consumer to satisfy any new debt. The minimum expense norms table also sets out a minimum expense amount the credit provider must consider.

 

41.               Regulation 23A (12) (b) requires the credit provider to consider all monthly debt repayment obligations in terms of credit agreements, as reflected on the consumer’s credit profile held by a registered credit bureau.

 

42.               Regulation 23A (13) also requires the credit provider to consider the consumer’s debt repayment history as a consumer under credit agreements, as envisaged in section 81 (2) (a), within seven business days before initially approving the credit.

 

43.               Moreover, regulation 23A (15) requires a credit provider to disclose to the consumer the credit cost multiple and the total cost of credit in the PAQ.

 

Alleged contraventions

 

44.               The applicant alleged that the respondent failed to conduct proper affordability assessments in all the sample files. It failed to take steps to assess the consumers’ debt repayment histories and existing financial means, prospects and obligations.

 

45.               The respondent failed to conduct an affordability assessment at all in some instances. Some sample files did not have documentation or evidence concerning the consumers’ income, expenses, debt obligations, or debt repayment histories. Nor was there evidence that the respondent attempted to make an assessment or affordability calculation.[11]

 

46.               In other sample files, although the files contained documents and information, such as payslips, to carry out at least a partial affordability assessment, there was no evidence that the respondent made the assessment.[12]

 

47.               The respondent failed to obtain credit bureau reports before entering into some of the credit agreements.[13] The respondent also failed to ascertain the consumers’ current repayment obligations and to request them to provide information concerning their debt obligations.[14] In addition, The respondent failed to apply the minimum expense norms table required by regulation 23A (9).[15]

 

Respondent

 

48.               The respondent denied that it failed to conduct credit assessments in terms of section 81 (2). It conducted an informal credit assessment in some sample files but could not attach documents to prove assessments and calculations.[16] It did a full credit assessment with income, expenditure, and affordability in the other sample files.[17]

 

49.               Neither section 81 (2) (a) (ii) nor regulation 23A (13) compels the credit provider to obtain a consumer’s credit profile from a credit bureau to consider the consumer's debt repayment history. The respondent obtained a consumer report from the credit bureau in four sample files.[18] The consumers were either reoccurring clients or a staff member with proven credit records with the respondent in the other sample files. The respondent would not have granted credit to reoccurring clients if they had not settled their old debt and exhibited a good credit record.

 

50.               Neither the Act nor the regulations state how the credit provider must consider the consumer’s debt repayment history. In the present case, the respondent considered the debt repayment history by obtaining a consumer report and considering the particular consumer's debt repayment history with the respondent over the years. It, therefore, complied with section 81 (2) (a) (ii) read with regulation 23A (13).

 

51.               In all the sample files, the respondent conducted a proper credit assessment within the meaning of section 81 (2) (a) (iii). However, the respondent accepted in some sample files it failed to comply with regulation 23A (12) by considering all monthly credit agreement debt obligations reflected on the consumer’s credit profile held by a registered credit bureau and the minimum expense norms in regulation 23A (11).

 

52.               Each of the consumers’ disclosed expenses in the sample files exceeded the minimum monthly norms in regulation 23A (9). The respondent calculated their affordability using their latest salary slips, subtracted statutory expenses from the gross income, deducted monthly obligations from the net income, and used the discretionary income to assess affordability. The respondent also subtracted 5% from discretionary income before approving the credit to allow consumers to deal with a financial emergency

 

Analysis

 

Reasonable steps

 

53.               Our courts have ruled that “reasonable steps” under section 81 (2) means that the assessor must conduct the assessment reasonably, i.e. not irrationally to comply with the phrase in the Act “to promote responsible credit granting and use and for that purpose to prohibit reckless credit granting.[19]

 

54.               There is nothing meaningful in the sample files to suggest that the respondent obtained the consumers’ debt repayment histories as required by section 81 (2) (a) (ii). Instead, the respondent looked at the consumers’ credit histories with it. It failed to produce evidence on which the Tribunal could rely that it did so with other credit providers. The respondent conceded that six sample files failed to comply with regulation 23A (12) (b) to consider all monthly debt repayment obligations reflected in the consumers’ credit profile by a registered credit bureau before concluding the credit agreements. The failure to obtain credit bureau reports meant that the respondent could not correctly calculate the consumers’ discretionary income.

 

55.               The respondent’s attempts to comply with section 81 (2) (a) (iii) to assess the proposed consumer’s existing financial means, prospects and obligations do not bear scrutiny. The respondent repeatedly granted credit to a pensioner with a fixed income on the basis that his income and expenditure had remained the same and its long-standing relationship with him.[20] In others, the respondent conducted informal assessments of income and expenditure without setting out the actual steps it took and granted credit based on the consumers’ credit records over the years the respondent had granted credit to them.[21] Neither the Act nor the regulations provide for informal assessments.

 

56.               The Tribunal is unpersuaded that the respondent’s reliance on consumers’ credit records over the years with the respondent amounts to a reasonable step. It is trite that consumers personal circumstances change for numerous reasons. The Covid-19 pandemic, illness and a deteriorating national economy are just some reasons. Consequently, it is not axiomatic that a consumer’s previous credit record will continue. This much is apparent from the respondent’s current financial hardship and the compounding impact of the Covid-19 pandemic on its financial position.[22]

 

57.               It also appears that the respondent acted inconsistently by treating consumers differently. The respondent obtained a consumer report from a credit bureau in four sample files.[23] In the remaining six sample files, the consumers were either reoccurring clients[24] or a staff member[25] with what the respondent considered proven credit records.

 

58.               The respondent appears to have appropriated the right to decide whether to obtain a consumer report. The reports are essential when conducting a proper affordability assessment. As the applicant pointed out, they provide the only reasonably accurate source for a credit provider to obtain consumers’ debt repayment histories and calculate their current debt repayment obligations. They also help avoid situations where consumers seek to obtain loans simultaneously from numerous credit providers.

 

59.               The respondent placed great store in its practice that it would not have granted credit to reoccurring clients if they had not settled the old debt and exhibited a good credit record. It also relied on consumers being up to date, in advance or having paid their accounts in full as evidence of its responsible lending practices. There was also no evidence that the respondent’s clients suffered

harm.

 

60.               In the Tribunal’s view, none of these considerations exonerates the respondent from falling foul of section 80 (1) (a). That section requires the credit provider to conduct an assessment as required by section 81 (2), irrespective of what the outcome of such an assessment might have concluded.

 

61.               It is also telling that the respondent conceded that it did not, as required by regulation 23A (9), utilise the minimum expense norms table, broken down by monthly gross income when calculating the consumers’ existing financial obligations. Moreover, it does not help the respondent to submit that in all the sample files, the consumers’ expenses exceeded the minimum monthly norms set out in regulation 23A.

 

62.               Ultimately, the sample files reveal that the respondent embarked on a frolic of informal assessments and cherry-picked the obligations in regulation 23A it would comply with.

 

63.               Consequently, the respondent did not take the required reasonable steps when conducting all the affordability assessments.

 

The Plascon-Evans rule

 

64.               In argument, the respondent relied on what has become known as the Plascon-Evans rule. According to the respondent, these proceedings are on affidavit, and the parties have disputes of fact. Therefore, the applicant could only succeed if the facts averred in its founding affidavit, which the respondent admitted and the facts the respondent alleged, justify the relief sought.[26]

 

65.               The Tribunal is mindful that there are exceptions to this general rule. In some instances, denial by a respondent of a fact alleged by an applicant may not raise a real, genuine or bona fide dispute of fact. Or is so far-fetched or untenable that the court is justified in rejecting them on the papers.[27]

 

66.               More recently, our courts have held that a real, genuine, and bona fide dispute of fact can only exist where the court is satisfied that the party who purports to raise the dispute has seriously in its affidavit unambiguously addressed the disputed fact.[28]

 

67.               In this matter, the respondent stated it conducted the affordability assessments. However, its averments concerning the affordability assessments were threadbare. It had full knowledge of how it conducted the affordability assessments. It should have taken the Tribunal into its confidence and set out in far greater detail the steps it took when conducting the assessments. The respondent’s failure to have done so persuades the Tribunal that it failed to raise a real, genuine and bona fide dispute of fact.

 

68.               Consequently, the respondent has not brought itself within the protection of the Plascon-Evans rule.

 

Reckless credit

 

Contravention 4: Contravention of Section 81 (3) read with Section 80 (1) (a)

 

The Act

 

69.               Section 80 deals with reckless credit. Section 80 (1) (a) provides that a credit agreement is reckless if, when concluding the agreement, the credit provider failed to conduct an assessment as required by section 81 (2), irrespective of what the outcome of the assessment might have concluded.

 

70.               Section 81 (3) specifically prohibits a credit provider from entering into a reckless credit agreement with a prospective consumer.

 

71.               Section 83 (2) (a) empowers the Tribunal upon declaring a credit agreement as reckless to set aside all or part of the consumer’s rights and obligations under that credit agreement that is just and reasonable in the circumstances.

 

Alleged contravention

 

72.               The applicant alleged that the respondent’s failure to conduct proper affordability assessments meant the respondent entered into reckless credit agreements with consumers. The respondent had, therefore, contravened section 81 (3) read with section 80 (1) (a).

 

73.               The applicant sought an order under section 83 (2) (a), declaring the credit agreements reckless under section 80 (1) (a).

 

74.               The applicant also sought an order setting aside all the consumers’ obligations under those agreements.

 

Respondent

 

75.               The respondent disputed that the applicant had made a case that the credit agreements in all the sample files constituted reckless credit.

 

Analysis

 

76.               The Tribunal is satisfied that the respondent has contravened section 81 (3) read with section 80 (1) (a) by entering into reckless credit agreements with consumers because the respondent failed in all the sample files to conduct proper affordability assessments. Consequently, the applicant is entitled to the further relief it sought, setting aside all the consumers obligations under those agreements.

 

Alternative claim: Failure to maintain records of applications for credit Contravention 5: Contravention of section 170 read with regulation 55 (1) (b) (vi) The Act

 

77.               Section 170 requires a credit provider to maintain records of all applications for credit, credit agreements, and credit accounts in the prescribed manner, form and time.

 

78.               Regulation 55 (1) (b) requires a credit provider to maintain a record for each consumer of the documentation to support the steps required of it in terms of section 81 (2).

 

Alleged contravention and analysis

 

79.               The respondent conceded this contravention. However, the applicant only pursued this contravention if the Tribunal found that the respondent had conducted proper affordability assessments. The Tribunal has found that the respondent failed to conduct proper affordability assessments.

 

80.               Consequently, it is not necessary to deal with this contravention that the respondent failed to maintain the evidence of the steps required by section 81 (2).

 

Contravention 6: Contravention section 52 (5) (c) read with general condition 3 and regulations 64,

65 and 66

 

The Act, regulations and conditions

 

81.               Section 52 (5) (c) requires a registrant to comply with its conditions of registration and the Act.

 

82.               Regulation 64 (2) requires a credit provider whose annual disbursements are below R15 million to complete and submit the statistical return in form 39 to the applicant by 15 February each year for the period 1 January to 30 December.

 

83.               Regulation 65 concerns annual financial statements. It requires a credit provider to submit its annual financial statements to the applicant within six months after the credit provider’s financial year-end.

 

84.               Regulation 66 concerns annual financial and operational returns. It requires a credit provider to submit an annual financial and operational return in form 40 to the respondent within six months after the registered credit provider’s financial year-end.

 

85.               General condition 3 requires the respondent to submit the reports and returns required in the regulations within the specified period.

 

Alleged contraventions

 

86.               The applicant alleged that the respondent had failed to submit the prescribed returns and annual financial statements for 2017 to 2020 as required by section 52 (5) (c) read with condition 3 and regulations 64, 65 and 66.

 

Respondent

 

87.               The respondent submitted that, in some instances, it submitted the required forms late but could not provide proof that it delivered the forms to the applicant. Ultimately, it conceded that it had fallen foul of this contravention.

 

Analysis

 

88.               The respondent’s concession means it contravened section 52 (5) (c) read with general condition 3 and regulations 64, 65 and 66.

 

CONCLUSION

 

89.               Consequently, the Tribunal is satisfied that the respondent repeatedly contravened the sections, regulations, and conditions in the preceding paragraphs. Therefore, it committed prohibited conduct, which justifies declaring the respondent’s credit agreements with the consumers in the sample files as reckless.

 

90.               The Tribunal proceeds to consider an appropriate order.

 

CONSIDERATION OF AN APPROPRIATE ORDER

 

Declaring the respondent to have repeatedly contravened the Act, committed prohibited conduct and declaring the respondent’s credit agreements as reckless

 

91.               Following the applicant’s request, the Tribunal deems it appropriate to order that the respondent’s repeated contraventions amount to prohibited conduct and justifies declaring the respondent’s credit agreements with consumers in the sample files as reckless. The Tribunal proceeds to consider the applicant’s other wide-ranging requested relief.

 

Administrative fine

 

92.               The applicant has requested the Tribunal to impose an administrative fine. The Tribunal is satisfied that the nature of the respondent’s contraventions and the consequent financial implications for consumers justify the Tribunal imposing an administrative fine on the respondent.

 

93.               The Act was introduced into the South African legislative landscape to curb precisely the types of excesses that the Tribunal has found the respondent to have perpetrated. Therefore, the Tribunal would fail in its duty to not send a clear message to the respondent and other credit providers that the Tribunal will not tolerate credit providers contravening the Act.

 

94.               Section 151 (3) sets out the factors the Tribunal must consider when determining an appropriate fine. The Tribunal proceeds to consider each in turn.

 

Nature, duration, gravity, and extent of the contraventions

 

95.               The contraventions show the respondent failed to provide consumers with PAQs in the prescribed form and containing the prescribed contents. It failed to provide consumers with credit agreements and conduct proper affordability assessments. It also granted credit recklessly and contravened its conditions as a credit provider. These contraventions of the Act are severe. In particular, the respondent’s failure to conduct proper affordability assessments placed consumers at severe risk of over-indebtedness.

 

Loss or damage suffered as a result of the contraventions

 

96.               The applicant did not place specific evidence before the Tribunal concerning the actual loss or damage consumers suffered. Since the Tribunal has found reckless lending, it is satisfied that it may reasonably conclude that consumers suffered loss through their fee and interest payments.

Respondent’s behaviour

 

97.               There is no plausible reason why the respondent should not have complied with its obligations as a credit provider under the Act. The respondent has bought the consumer credit industry into disrepute and disregarded consumers’ rights. However, the Tribunal notes that the respondent ceased extending credit upon receiving this application in March 2021. The respondent also approached a specialist attorney to assist it in amending its PAQ and credit agreement to comply with the Act and regulations and ensure that its credit assessments comply with regulation 23A.

 

Market circumstances under which the contraventions occurred

 

98.               It appears that the respondent simply ignored its obligations in terms of the Act. It could do so because it operates in an environment where consumers are ill-educated about their rights concerning access to and cost of credit. It appears that the respondent’s prohibited conduct mainly impacted vulnerable consumers.

 

Level of profit derived from the contraventions

 

99.               The applicant submitted that the respondent had derived a substantial profit from its activities. The respondent’s form 40 return for the year ending February 2017 showed that its total turnover from credit extension was R177 456.38. The applicant also attached the respondent’s annual financial statements for the year ending February 2016. These returns show no more than the respondent’s financial position some five and six years ago, respectively. The Tribunal, therefore, attaches little importance to them.

 

100.            The respondent attached its 2018 and 2019 annual financial statements to its answering affidavit. However, neither the applicant nor the respondent relied on them. Nor does the Tribunal.

 

The degree to which the respondent co-operated with the applicant

 

101.            The Tribunal has considered that the respondent provided the inspectors with the required information and co-operated with them during the investigation.

Respondent’s prior contraventions

 

102.            The respondent has not been the subject of prior investigations or enforcement measures.

 

Amount of the fine

 

103.            The applicant did not produce evidence concerning the respondent’s financial turnover during the previous financial year. Consequently, the Tribunal may impose a fine limited to a maximum of R1 000 000.00.

 

104.            Although the respondent appears to have been a relatively small credit provider, it is crucial to send a strong message to all credit providers, including their employees, that they cannot escape complying with the Act.

 

105.            These considerations persuade the Tribunal that it is appropriate to impose an administrative fine of R30 000.00.

 

Appointment of an auditor

 

106.            The Tribunal is aware that the investigation that led to this application comprised a small sample of the respondent’s consumer files. The Tribunal has found, amongst other things, that the respondent has extended reckless credit. The evidence placed before the Tribunal means that the Tribunal cannot establish the extent of this practice. Therefore, It is appropriate to appoint an independent auditor to assess the situation and establish the facts.

 

Other requested orders

 

107.            The applicant requested that the Tribunal make an order interdicting the respondent from engaging in prohibited conduct in the future. The interdict will serve no purpose because the respondent may not engage in prohibited conduct given the provisions of the Act.[29]

 

ORDER

 

108.            Accordingly, the Tribunal makes the following order:

 

108.1.      The respondent has repeatedly contravened the following sections of the Act, regulations and conditions:

 

108.1.1. section 92 (1) read with regulation 28 (1) and form 20 in schedule 1 of the regulations;

108.1.2. section 93 (2) read with regulation 30 (1) and form 20.2 in schedule 1 of the regulations;

108.1.3. section 81 (2) (a) (ii) and (iii) read with regulation 23A;

108.1.4. section 81 (3) read together with section 80 (1) (a); and

108.1.5. section 52 (5) (c) read with general condition 3 of the respondent’s registration conditions and regulations 64, 65 and 66.

 

108.2.      The repeated contraventions are prohibited conduct in terms of section 150 (a) of the Act.

 

108.3.      The respondent’s credit agreements with consumers in annexures G1 to G10 of the investigation report are reckless in terms of section 80 (1) (a) and set aside. The respondent is within 30 days of the independent auditor’s report in paragraph 108.4.2 of this order at its cost to:

 

108.3.1. refund all the credit costs charged and recovered from those consumers;

 

108.3.2. refrain from enforcing those agreements. If the respondent has taken enforcement action against a consumer, the respondent is to withdraw that action formally and tender payment of the consumer’s legal costs where the consumer is defending or opposing the action; and

 

108.3.3. take all reasonable steps necessary to ensure:

 

108.3.3.1.                    the removal of adverse credit bureau records that arose from those credit agreements; and

108.3.3.2.                    the rescission or abandonment of civil judgements against those consumers.

108.4.      The respondent is:

 

108.4.1. within 30 days of the date of issue of this judgment to appoint an independent auditor, registered as a Chartered Accountant, at its own cost to determine and compile a list of all the consumers with whom the respondent concluded credit agreements within the last three years of the date of issue of this judgment without properly conducting affordability assessments in terms of section 81 (2) (a) (ii) and/or (iii) of the Act read with regulation 23A;

 

108.4.2. within 120 days of the date of issue of this judgment, the respondent is to furnish the independent auditor’s report and the respondent’s written report to the applicant detailing the consumers’ identities, refunds the respondent made to them and its compliance measures under paragraph 108.3 of this judgment;

 

108.5.      The applicant may, upon receipt of the independent auditor’s report, on these papers, duly supplemented, apply to the Tribunal for an order:

 

108.5.1. declaring the agreements in paragraph 108.4.1 of this judgment as reckless in terms of section 80 (1) (a);

 

108.5.2. setting aside the consumers obligations under the agreements in paragraph 108.4.1; and

 

108.5.3. ordering the respondent to comply with the same terms in paragraph 108.3 of this judgment concerning the agreements in paragraph 108.4.1.

 

108.6.      The respondent is within 90 business days of the date of issue of this judgment to pay an administrative fine of R30 000.00 (thirty thousand rand) into the National Revenue Fund’s following bank account:

 

Bank: The Standard Bank of South Africa

Account holder: Department of Trade and Industry Branch name: Sunnyside

Branch code: 05100

Account number: [....]

Reference: NCT/183002/2021/140 (1) and name of person or business making the payment.

 

108.7.      There is no costs order.

 

 

 

Mr T Bailey - Presiding Tribunal member

Tribunal members Ms D Terblanche and Ms P Beck concur with this judgment.

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