‘Paltry’ fine won’t deter repeat of alleged bad lending practices, says consumer activist

Simon Lapping, who has tirelessly lobbied the National Credit Regulator (NCR) to investigate the Satinsky scheme and to provide redress to consumers who were granted credit recklessly, was scathing of the “paltry settlement” reached between Absa credit and the regulator.

A R10-million fine will hardly be felt by a lender the size of Absa, Lapping says, and it therefore won’t deter the kind of bad lending practices alleged by consumers in this case.

Lapping says the NCR’s case against Absa stems from about 1 000 complaints lodged with the regulator by Satinsky buyers.

“In response, the regulator asked Absa for a random sample of 200 credit agreements [from the 6 500 credit agreements the bank has with Satinsky customers]. Upon investigation, the regulator found 70-odd to be dubious, and my understanding is that the relief in this settlement extends to these consumers only – which is grossly unfair.”

Lapping plans to lodge a complaint against the regulator with the Public Protector.

He says his complaint, which will be co-signed by Democratic Alliance Member of Parliament Michael Waters, will be for the failure of the regulator to conduct a thorough investigation in this case and for agreeing to a settlement that does not provide adequate redress to consumers.

Stephen Logan, the founder of Fair Credit, says this is history repeating itself: “It’s African Bank all over again: another case of the regulator taking a small sample [of credit agreements] and giving partial relief to a limited number of consumers.” A full audit of all credit agreements is required, he says.

The regulator has yet to bring cases against Nedbank’s Motor Vehicle Finance (MFC) and Standard Bank. MFC financed about 14 000 Satinsky deals, and reportedly has an exposure of R1.6 billion, while Standard Bank financed 3 600 Satinsky deals, giving it an exposure of R468 million.

If you are a Satinsky buyer and you believe you are a victim of reckless lending, all is not lost if you aren’t among the lucky few to benefit from the Absa/NCR settlement.

Logan says the fine provides a good basis for customers to stop paying their instalments. “The easiest route to redress under the National Credit Act is non-payment. Because when they don’t pay, the creditor takes you to court, and the court is obliged to determine if there was reckless lending, which must be raised as a defence by the consumer,” Logan says.

He cautioned, however, that consumers who go this route should be aware that if they lose in court they would have to pay the credit provider’s legal costs.

The regulator has also lodged a case against Satinsky 128 trading as Just Group Africa. Nthupang Magolego, a senior legal advisor at the NCR, told Personal Finance this week that the matter is pending at the National Consumer Tribunal (NCT). “We are waiting for a hearing date from the NCT,” Magolego said.