BLACK EYE FOR LENDER

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

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.