Win for consumers
Justice was once again done for consumers when t he North Gauteng High Court dismissed the appeal by microlender Barko Financial Services against the National Credit Regulator ( NCR) and the National Consumer Tribunal (NCT) with costs. Barko will now have to refund customers who were charged more t han t he fee stipulated i n t he National Credit Act (NCA) for the cost of credit agreements. A limit of R50 is set in terms of the NCA to l imit the cost for consumers to obtain credit.
The NCR issued a compliance notice against Barko in June 2010 after f indi ng during an i nspection of Barko’s business practices that the microlender was forcing consumers to enter into an agreement to pay a service fee to another company called NuPay Solutions for processing payments. NuPay processed and managed transactions paid into the Barko account by the consumer.
The compliance notice instructed Barko to stop the practice of passing the NuPay fee on to its customers if it was more than the prescribed maximum service fee of R50. The NuPay fee contravened Section 90 (1) and (2) read with Section 91 (a) of t he National Credit Act.
The NCR i nst r uc t e d Barko t o refund customers for t hese fees, but Barko referred the matter to the NCT, which heard the matter in January 2011 and passed judgement in June 2011. In its judgement the NCT agreed with the NCR and ordered Barko to stop charg- i ng it s customers a ser v ice fee and refund them the portion of the service provider fee they were charged which, when added to another service fee they were charged under their credit agreement, came to more than R50.
The Tribunal found that consumers were ef fect i vely forced to enter an agreement to pay a service fee for processing payments to Nupay Solutions. Barko then took the matter on appeal to the North Gauteng High Court.
According to the NCA, consumers can only be charged for the principal debt and an initiation fee, which cannot exceed the prescribed amount relative to t he principal debt and which can only be charged if the credit agreement goes ahead. A service fee is defined by section 1 of the NCA as “a fee that may be charged periodically by a credit provider in connection with the routine administration cost of maintaining a credit agreement”.
In its appeal, Barko disputed that the NuPay fees paid by consumers fall wit hi n t he c at e gor y of t he NCA because consumers entered into a separate agreement with NuPay. Barko argued that consumers had a choice to enter into the agreement with NuPay when entering into a credit agreement with Barko and not all consumers chose the NuPay option.
Judge Pretorius said in her judgment that the assumption is clear that it was pointed out to consumers who did not choose the NuPay option that they will have to spend time and money to go and pay their monthly instalments in cash at the NuPay off ices, which is a contravention of section 71(a) of the NCA because it induces the consumer to enter i nto t he NuPay agreement. Consumers were given no reason why they could not pay Barko directly. 90% of t he consumers chose to pay t heir debt through NuPay after the advantages of using the NuPay system were discussed with consumers by a representative from Barko and not NuPay.
The court found that the consumers had clearly signed an agreement with Barko and not with NuPay. A service level agreement existed between Barko a nd NuPay t hat Barko would pay NuPay’s fee and the court found that once the money was paid to Barko by NuPay, it became Barko’s money, which is why it is correct to expect that Barko must pay back consumers who paid more than R50.
In her j udgment Judge Pretorius found t hat t he actions of Barko to induce consumers to enter into a supplementary agreement with NuPay “are inconsistent with a transparent credit market” and that it does not protect consumers and is therefore a violation of the NCA.
This judgment followed on the heels of another victory for the NCR in the Supreme Court of Appeal in December last year against Standard Bank. The court found that the bank had charged excessive administration fees on homeloans granted under the Usury Act 73 of 1968, before t he NCA came i nto