Fin­bond to ap­pear be­fore tri­bunal

CityPress - - Business - MAYA FISHER-FRENCH busi­ness@city­

Cus­tomers who have bor­rowed money from Fin­Bond could re­ceive a re­fund af­ter the Na­tional Credit Reg­u­la­tor an­nounced that it had re­ferred Fin­bond Mu­tual Bank (Fin­bond) to the Na­tional Con­sumer Tri­bunal for charg­ing ex­ces­sive credit life premi­ums.

This was af­ter an in­ves­ti­ga­tion by City Press ear­lier this year into some of the ex­ces­sive credit life premi­ums charged by mi­crolen­ders such as Fin­Bond.

City Press found that, for ex­am­ple, one Fin­Bond client was pay­ing R288 per month for credit life on a R5 000 loan, which was re­payable over four months. This in ef­fect rep­re­sented a R1 115 pre­mium for a loan of just R5 000 and made up 40% of the to­tal cost of the loan.

In another case, a cus­tomer bor­rowed R6 000 to be re­paid over four months – the credit life in­sur­ance of R346 per month, or R1 386 over the pe­riod of the loan, con­sti­tuted more than 40% of the loan costs.

In its pa­per, A tech­ni­cal re­view of the con­sumer credit in­sur­ance mar­ket in South Africa, Na­tional Trea­sury and the Fi­nan­cial Ser­vices Board rec­om­mended that credit life be capped at a pre­mium of around R4 per month for ev­ery R1 000 bor­rowed. The Fin­Bond loans have premi­ums of R56/R1 000 – more than 10 times the rec­om­mended rate.

When ques­tioned about the rates charged, Wil­lie van Aardt, CEO of Fin­bond Mu­tual Bank, told City Press the Na­tional Trea­sury rec­om­men­da­tion was based purely on death ben­e­fits.

“Our clients, who vol­un­tar­ily elect to make use of our com­bined ‘credit life, re­trench­ment and dis­abil­ity cover in­sur­ance’, en­joy not only death ben­e­fits but also re­trench­ment and de­fined loss of work ben­e­fits, as well as tem­po­rary and per­ma­nent dis­abil­ity cover,” he said.

Leanne Jack­son, head of mar­ket con­duct strat­egy at the Fi­nan­cial Ser­vices Board, re­sponded that any price caps to be pro­posed un­der the Na­tional Credit Act “are not in­tended to re­late only to the price of death ben­e­fits, but will also ad­dress pric­ing of dis­abil­ity and re­trench­ment ben­e­fits. The var­i­ous pro­pos­als in the re­port are not in­tended to be con­fined to death ben­e­fits, but are aimed at a fair value propo­si­tion for all as­pects of con­sumer credit in­sur­ance, in­clud­ing ad­di­tional ben­e­fits such as cover for dis­abil­ity and re­trench­ment, as well as short-term in­sur­ance as­set cover.”

Although the rec­om­men­da­tions of the Na­tional Trea­sury and the Fi­nan­cial Ser­vices Board have not yet been fi­nalised, Le­siba Mashapa, com­pany sec­re­tary at the Na­tional Credit Reg­u­la­tor, says the reg­u­la­tor is re­quest­ing the tri­bunal to, among other things, or­der Fin­bond to re­fund all af­fected con­sumers and pay an ad­min­is­tra­tive fine.

Af­fected con­sumers can con­tact the Na­tional Credit Reg­u­la­tor on 0860 627 627, or via

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