Shoprite found guilty of reckless lending

THE crux of the National Credit Regulator’s (NCR) case when it pursued legal action against Shoprite was that the company entered into reckless credit agreements with consumers that made them over-indebted.

This was a result of the company not taking reasonable steps to assess consumers’ debt repayment history and their existing financial means, prospects and obligations, the NCR argued.

The National Consumer Tribunal found Shoprite guilty of reckless lending, and ordered it to pay a R1 million fine.

Shoprite has also been ordered to appoint a debt counsellor at its own costs for the people involved.

The NCR presented the tribunal with details and information about a number of consumers with whom it alleged the Shoprite entered into reckless credit agreements.

It also argued that these consumers all had negative disposable income and Shoprite’s conduct in entering into credit agreements with them was reckless.

Shoprite, though agreeing with the NCR that the listed consumers had negative disposable incomes, took issue with the view that a negative disposable income means that the consumer was, or was about to become, over-indebted, and that by extension granting credit to those consumers would make them more over-indebted.

Shoprite provided the tribunal with a detailed explanation of its affordability assessment mechanisms and procedures, as allowed in terms of section 82(1) of the National Credit Act. The Shoprite Group yesterday said it noted the judgment.

“This matter relates to credit agreements concluded in June 2013 and June 2014 with nine consumers from among thousands. In all these cases the credit extended was settled in full by the customers concerned.”