Win for con­sumers

Finweek English Edition - - MONEY -

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

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