Bruising defeat for regulator

PASSED: RETAILERS’ CLUB FEES FIRMLY IN FOCUS

Lewis Stores’ case dismissal might favour other retailers in the firing line.

AHigh Court judgment that paves the way for Lewis to continue charging consumers club fees and extended warranties could hobble the National Credit Regulator’s (NCR) efforts against retailers breaching credit regulations.

On Monday, the Gauteng High Court dismissed an NCR appeal to a Consumer Tribunal ruling in June 2017, which cleared Lewis of breaching credit regulations for offering its customers club fees and extended warranties.

At the time, two of the three tribunal members ruled that club fees and extended warranties were reflected by Lewis in a separate statement of account and not included in the credit agreement.

However, the NCR disagreed with the tribunal’s views, saying unsuspecting consumers are charged extra fees, pushing up the cost of buying goods on credit.

The nub of the High Court judgment is that the National Credit Act (NCA) doesn’t prevent credit providers from offering customers a club membership and extended warranties, provided they aren’t part of the cost of credit.

The court believed Lewis’ club fees don’t form part of the cost of credit and the retailer may include the cost of an extended warranty as part of its fees.

Double blow

The judgment is another blow for the NCR, following a Western Cape judgment in March 2018 that scrapped a major aspect of its affordability assessment regulations, which required consumers to present additional documents when applying for credit. The Foschini Group (TFG), Mr Price and Truworths hauled the Department of Trade and Industry and the NCR to court and won.

The NCR began its cost of credit investigation in 2015, with a specific focus on the cost of club fees and credit life insurance charged by retailers.

Caroline Young, NCR legal advisor, recently said the NCA allows for certain fees that can be charged to consumers – such as initiation fees and interest on store accounts.

“We found in our investigation that there were other fees included in the credit agreements and these are prohibited charges.”

Over the past two years, the NCR has referred Edcon, TFG and Mr Price to the tribunal for breaching credit regulations in the club fees they charge. If found guilty, the retailers could face a fine of up to 10% of their annual sales or be forced to refund consumers’ dating back to 2007.