Tribunal turns heat on retailers

RETAILERS facing sluggish growth in sales are in the crosshairs of a National Credit Regulator credit crackdown that has netted four big industry players.

Clothing retailer Edcon is the latest to be referred to the National Consumer Tribunal for charging customers a club fee on credit agreements‚ which the regulator says is a contravention of the National Credit Act.

This is part of a series of regulatory clampdowns on the industry. The Department of Trade and Industry has gazetted draft limits on the cost of credit life insurance‚ which may see insurance on credit facilities such as store cards capped at R4.50 for every R1 000 borrowed.

Initiation fees have escaped unscathed‚ rising an average R33 across all credit categories. Maximum initiation fees also rose by up to R250 for mortgage agreements.

Two units of furniture retailer the JD Group‚ its rival Lewis‚ and Shoprite have also been referred to the tribunal and reprimanded for selling suspect insurance policies.

A review of retailers’ recent annual reports shows that the products that the regulator is targeting have experienced sales growth nearly on par with merchandise sales.

Shoprite had a 10.5% growth in net premiums earned during the year to June‚ which was slightly lower than merchandise sales at 11.2%. In total‚ the retailer earned an amount of R409-million in insurance premiums.

Minnow Truworths generated R6-million in insurance income in the same period‚ which was double what it earned the previous year. Its merchandise sales were up 8%.

Edcon earned R550-million in club fees in the year-toMarch‚ as well as R491-million from selling insurance.

The regulator will intensify its efforts to rein in irregular credit peddling‚ according to the regulator’s chief executive Nomsa Motshegare. The JSE general retailers index has fallen 4.59% since news of Lewis’s referral broke in July.

Trade in the index’s member companies was slowly inching up‚ but plunged the day the regulator said it had referred the unlisted Edcon to the tribunal.

Edcon spokeswoman Vuyo Mtawa said it had received the regulator’s notice of motion on November 5.

“Our legal team is studying the notice of motion and the supplementary documents,” Mtawa said. “Edcon will issue a statement at the appropriate time.” Club membership‚ which includes discounted funeral cover and legal assistance‚ among other benefits‚ is an optional product and not a requirement of any credit agreement. — BDLive