Af­ter a tip from Sassa, a mi­crolen­der in Lim­popo is be­ing made to pay for its abuses, to the ben­e­fit of those it over­charged and cheated

Financial Mail - - IN GOOD FAITH - @carmel­rickard

They may be an un­likely Fa­ther Christ­mas team, but thanks to the Na­tional Credit Reg­u­la­tor and the Na­tional Con­sumer Tribunal, clients of a con­tentious mi­crolend­ing out­fit are about to get a rare fi­nan­cial hol­i­day. Tipped off by the SA So­cial Se­cu­rity Agency (Sassa), the reg­u­la­tor vis­ited of­fices of Se­wa­tu­mong Mi­cro Lend­ing CC, a busi­ness with wide reach in and around Lim­popo. Its find­ings con­firmed Sassa’s con­cern that the lender was with a slew of puni­tive or­ders that should make ev­ery other cash lender think care­fully.

Se­wa­tu­mong did not at­tend the hear­ing but the reg­u­la­tor proved that the busi­ness had been kept fully aware of it. Be­cause the tribunal found that the busi­ness was prop­erly no­ti­fied and yet filed no an­swer to the al­le­ga­tions, all the claims by the reg­u­la­tor were ad­mit­ted as ev­i­dence.

Among the al­le­ga­tions were that Se­wa­tu­mong failed to give bor­row­ers a pre-agree­ment state­ment or a copy of the credit agree­ment; no proper af­ford­abil­ity as­sess­ment was car­ried out; there were no credit bu­reau records al­low­ing the lender to as­sess the debt re­pay­ment his­tory of bor­row­ers; and no bank state­ment or salary ad­vice state­ments were ob­tained. Be­cause no af­ford­abil­ity as­sess­ments and credit checks were car­ried out this meant that Se­wa­tu­mong en­tered into “reck­less credit agree­ments”.

The lender charged con­sumers way more in­ter­est than al­lowed and, despite all the me­dia cov­er­age on the courts’ views of this is­sue, Se­wa­tu­mong was also found to have de­manded that bor­row­ers give it “tem­po­rary or per­ma­nent pos­ses­sion” of their Sassa cards, VBS bank cards, Easy­pay cards and of­fi­cial iden­tity doc­u­ments.

Af­ter the reg­u­la­tor dis­cov­ered more than 100 Sassa cards il­le­gally held in the Se­wa­tu­mong of­fices, along with bank and other doc­u­ments, it opened a case at the Tho­hoyan­dou po­lice sta­tion — mean­ing that the mi­crolen­der could also face crim­i­nal charges.

The tribunal found Se­wa­tu­mong con­tra­vened a slew of leg­isla­tive and reg­u­la­tory pro­vi­sions, with dire con­se­quences — its con­duct was for­mally de­clared “pro­hib­ited” and its regis­tra­tion as a credit provider can­celled im­me­di­ately.

Ac­counts must be au­dited

The tribunal found that Se­wa­tu­mong, at his own cost, must im­me­di­ately ap­point an in­de­pen­dent au­di­tor to go through all open ac­counts. Ev­ery reck­lessly granted credit agree­ment is to be set aside. All the out­stand­ing debts on th­ese ac­counts are to be writ­ten off and the con­sumers’ obli­ga­tions un­der those agree­ments set aside.

The au­di­tor must list all bor­row­ers over­charged on in­ter­est and fees and re­fund th­ese amounts within 30 days of the au­di­tor’s re­port. If any con­sumer due for a re­fund can­not be found, that money will be paid into a trust ac­count held by the au­di­tor.

The tribunal showed some mercy, halv­ing the R1m fine sought by the reg­u­la­tor in ad­di­tion to th­ese penal­ties, and or­der­ing that the R500,000 must be paid by the year end. Though an un­ex­pected wind­fall for Se­wa­tu­mong’s debtors, the im­pact will also have neg­a­tive re­sults: with at least 100 em­ploy­ees in one Lim­popo mu­nic­i­pal­ity alone, clo­sure of Se­wa­tu­mong’s mi­crolend­ing busi­ness will be felt by many.

While the case is shock­ing con­fir­ma­tion that the poor and vul­ner­a­ble con­tinue to be ripped off, the tribunal’s tough and wide-rang­ing penal­ties will be a les­son to mi­crolen­ders. And it poses a chal­lenge to em­ploy­ers and com­mu­nity mem­bers — fol­low Sassa’s lead by re­port­ing rea­son­able sus­pi­cions that a mi­crolen­der is op­er­at­ing il­le­gally, and you could help clean up the in­dus­try.

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