Club fees outcry after ruling
‘PAY back the money.”
This is the demand angry consumers are making on social media after the National Consumer Tribunal outlawed the charging of club fees as part of credit agreements in a recent groundbreaking ruling.
National Credit Regulator investigations and enforcement manager Jacqueline Peters said the regulator would approach Edcon, the largest non-food retailer in South Africa, to request an independent audit of its loan book to establish the number of consumers to be refunded and the total amount to be refunded from 2007 to date.
Edcon owns Edgars, Red Square, Jet and CNA.
Peters said the ruling “settled” that the charging of a club fee on credit agreements was not permitted under the National Credit Act.
In its judgment, the tribunal said the NCA does not allow for any other fees or charges or costs to be included in a credit agreement or credit agreement documents, irrespective of the nature of the charge, fee or cost.
“This judgment provides clarity to retailers that they should observe the closed list of fees and charges provided for in the NCA. Consumers are urged to request the quotation from their credit providers so that they can properly check the cost of credit that is being offered,” Peters said.
Scores of consumers took to social media, including POST’s Facebook page, to vent their frustration about the practice and hailing the ruling as a victory for consumers.
Jerry Govender reacted: “Pay back the money… Edgars”. Caroline Amanda Pillay said: “That’s millions of rand in refunds. Lets hope they able to repay it”, while Dershnee N Dylan Reddy asked: “And those customers that no longer have an account with them?”
Amith Sewraj reacted with the the comment, “Ur’ll Owing Me Money”, and Danielle Jael Michael congratulated the regulator: “Best news ever, at least the NCR are doing something good.”
But a spokesman for Edcon cautioned that there would be no refunds for customers as the judgment was under review by its attorneys and the retailer would be appealing the court decision.
“The club benefits and advantages to members are still in existence and members are still benefiting from the many products and services. It is therefore not feasible to immediately stop the offering when benefits are still being used and accessible to Club members,” a spokesman said.
He said the retailer had “made every effort” to respond to customers who had inquired about the ruling and had explained that the matter had not been finalised.
“Club members understand this but where they insist on cancelling their club membership they are allowed to do this,” he said.
Asked whether Edcon charges interest on its club fees, he said that the retailer “charges interest on the total balance outstanding on the account”.
He said the concept of a club product with benefits was a well-established practice globally and not the issue in the ruling.
“The club product represents a basket of value-added services and benefits, which a customer receives in return for voluntary payment of a consideration. This consideration is known as a ‘club fee’ and Edcon provides a revolving credit facility in order for its customers to make purchases,” he said.
The ruling came after the NCR referred a complaint to the National Consumer Tribunal, alleging that club membership fees are a cost of credit, and charging such fees under a credit agreement is prohibited under the National Credit Act.
Edcon faces a fine that will be set at a future hearing, the date of which is yet to be announced.