Regulator piles pressure on Lewis
THE National Credit Regulator (NCR) has had limited success challenging big credit providers, but its move on Lewis Group this week added to investors’ concerns about retailers that rely on credit sales.
Lewis’s share has been under pressure since it hit a record high of R100 at the end of last month. On Friday, as investors contemplated the likely impact of the NCR’s move along with the proposed cuts to maximum interest rates on unsecured loans, it slid as low as R80.51.
Two units of the largest JSE-listed furniture retailer have been referred to the National Consumer Tribunal for mis-selling loss-ofemployment and disability cover to pensioners and selfemployed consumers. The NCR has asked the tribunal to undertake an audit, order refunds to affected customers and impose a R10-million fine.
Investors were not comforted by a statement from Lewis explaining that the referral related only to three cases of alleged breach of the National Credit Act.
The NCR challenge is just one of many potential disruptions to the unsecured lending business model, which has generated huge returns for Lewis over the past decade.
Last week, the Department of Trade and Industry stunned unsecured lenders when it proposed cutting the maximum allowable interest rates and slashing initiation and service fees.
If these are instituted, the maximum legal interest that could be charged would drop from 32.65% to 24.78%.
Then came the Cape Town High Court ruling that could radically overhaul the system of emolument attachment orders that underpins most unsecured lending activity.
A company spokesman said this week Lewis did not use attachment orders to collect debt “and does not hand over collections on the debtors’ book to external parties”.
Adding to the uncertainty is the contraction in demand for unsecured credit.
Intellidex analyst Phibion Makuwerere recently advised selling Lewis shares because of intense regulatory scrutiny and an expected slowdown in sales growth.