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

War­ranties, club fees dis­puted

The Star Early Edition - - NEWS - Sizwe Dlamini

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.

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