Licence cancellation ‘too severe’
UNSECURED loans provider Capfin yesterday said it would be a severe sanction for its licence to be cancelled as the 25 cases of alleged reckless lending at the firm were a minor sample.
IT WOULD be a severe sanction for Capfin’s credit licence to be cancelled as the 25 cases of alleged reckless lending at the company were only a fraction of its business, says Southern View Finance, which provides unsecured loans under Capfin.
The National Credit Regulator (NCR) recommended to the National Consumer Tribunal this week that Capfin’s licence be cancelled, a move that would put Brait’s investment in Southern View Finance at risk.
Capfin, which advances its loans through Pep and Ackermans stores, is accused of not properly conducting affordability assessments in respect of 25 customers. It is also accused of incorrectly disclosing the interest rate on loans as an annual instead of a monthly rate.
Brait owns 37% of Southern View Finance. Financial director Sam Sithole said the stake was not material to Brait. “The carrying value is 2% of our total net asset value. It’s not a material number for our balance sheet.”
At the end of December, Brait’s net asset value was R31.6bn, which made Brait’s 37% stake in Southern View Finance worth about R620m.
“We will attempt to engage with the NCR on the matter and go to the tribunal and have the matter set down and argued if necessary. The tribunal needs to hear all the arguments and make a decision. It would be a severe sanction (to cancel the licence) based on the complaint,” said Southern View Finance chairman Merwe Scholtz.
“Given the volume of the business that we process, the 25 cases identified by the NCR are a small sample. The aggregate value of the 25 loans identified by the NCR are in the order of R160,000 … this constitutes less than 0.1% of our business.”
The Southern View Finance website shows that Capfin processes about 200,000 loan applications per month.
Asked why it strongly thought Capfin’s licence should be cancelled, NCR company secretary Lesiba Mashapa said: “The NCR believes that reckless lending is a serious contravention of the National Credit Act. There are currently high levels of consumer overindebtedness in SA of which reckless lending is one of the contributory factors.
“Reckless lending has serious negative consequences for consumers because in the main they are left with no income to meet their daily needs after being granted reckless credit.”