Stripping away the Capitec ‘sensation’

At its AGM last week, banking group Capitec claimed the media were “sensationalising” the claims of reckless lending it faces.

This is a common refrain for politicians and companies who just happen to disagree with any criticism of their behaviour.

But this response doesn’t do Capitec — which has justifiably earned kudos for growing from nowhere to 7.3m customers in just a decade — much credit.

After all, the bank has won a great deal of goodwill over the past few years for forging a market where none existed, extending credit to people who had routinely been excluded by the big banks.

So when it is now accused of bending the rules and ripping off clients, Capitec would do well to engage with its critics and rectify problems. To refuse to engage, and sniff that issues have been “sensationalised”, is short-sighted.

The Capitec loans flagged by Clark Gardner’s Summit Financial Partners are “multiloans” — customers can apply for up to 12 loans a year using this facility.

The problem is, these clients end up paying hefty new initiation fees on each of those loans, even though they are essentially part of the same loan package.

Though Capitec CEO Gerrie Fourie has defended these multiloans, it speaks volumes that the bank has stopped offering the product.

“We can win against Summit, but we’re worried about reputational damage,” Fourie said last week.

But if there is damage, it will come from stories like that of Emile — one multiloan customer who racked up R13,946 in credit in just two years, even though his income was only R7,544.

This sort of story gives little solace to investors, at a time when the regulator is cracking down on credit abuses.

Capitec has forged an enviable reputation for acting differently from the conventional banks. Here again, it should take the high road by engaging with the facts and fixing those things it got wrong, not by shooting the messenger.