Warranties, club fees disputed as NCR appeals Lewis’ tribunal ruling

Warranties, club fees disputed

THE National Credit Regulator (NCR) is appealing the judgment by the National Consumer Tribunal, dismissing the NCR’s referral against Lewis Stores.

The referral related to Lewis offering consumers extended warranties that run concurrently with manufacturers’ warranties and the charging of a club fee reflected in consumers’ account statements.

Lewis, which was one of the first South African retailers to expand into neighbouring southern African countries, has 716 stores across all metropolitan areas, with a strong presence in rural South Africa.

Lewis sells furniture on in-store credit, mostly to lower income groups.

In a majority judgment, the tribunal found the referral was distinguishable from the Edcon referral in that the club fee formed part of the credit agreement in the Edcon referral.

It was an integral part of the credit agreement process.

In the Lewis referral, the majority judgment found that there was a separate contract for joining the club and a separate fee charged for club membership.

In the referral, the NCR also challenged the extended warranties offered to consumers in that they ran concurrently with manufacturers’ warranties.

This was because some warranty agreements had no duration dates or their duration dates were the same as those on the credit agreements.

The majority judgment found that these were not a contravention of the National Credit Act. Lewis chief executive Johan Enslin welcomed the ruling earlier this week.

“The National Credit Act does not prevent credit providers from offering the services of a club to its customers, provided the services are not part of the ‘cost of credit’,” he said.

In a minority judgment, the tribunal found the club fees and extended warranties offered by Lewis contravened the act.

The NCR is appealing the judgment.

The NCR does not support the credit retailers’ conduct of charging consumers a club fee on credit agreements or under any supplementary agreements or documents.

It said this fee increased the consumers’ cost of credit.

The NCR also announced last week that it had referred Mr Price Group to the tribunal following an investigation that revealed that Mr Price had charged consumers a club fee on credit agreements.

It said the charging of a club fee on credit agreements was not permitted by the National Credit Act. “The National Credit Act allows consumers to be given a quotation which sets out the cost of credit, before signing credit agreements.

“Consumers should request this quotation from their credit providers so that they can properly check the cost of credit that is being offered,” said Nthupang Magolego, a senior legal adviser at the NCR.

Meanwhile, Lewis, targeting customers in the fast-growing middle to lower-income market, reported a drop in full-year profit last month citing weak economic growth, which it said gnawed at disposable income.

Lewis shares decreased by 5.14 percent on the JSE yesterday to close at R33.20.