Credit regulator asks tribunal to fine Shoprite for reckless lending to pensioners
Credit regulator recommends retailer is fined and consumers are refunded
SOUTH Africa’s credit regulator has asked a consumer tribunal to impose a fine on grocer and furniture retailer Shoprite for reckless lending.
The National Credit Regulator (NCR) has referred Shoprite to the National Credit Tribunal (NCT) for selling retrenchment and occupational disability covers to pensioners and people receiving government’s old age grants.
Shoprite also sold a consumer a job-loss insurance policy for a six-month loan that had a waiting period of six months, the NCR said.
The government has been cracking down on reckless lending as highly indebted consumers struggle to repay loans amid a deteriorating economy and rising interest rates.
The NCR investigated and fined African Bank Investments before it collapsed in August last year.
It has also probed practices at Capitec Bank, which provides unsecured loans to lowincome earners.
Fewer rules
While the banks are regulated by the central bank and various laws, furniture retailers face fewer rules.
The NCR recommended that Shoprite refund the affected consumers their premiums, the reckless loans be written off, Shoprite pay an administrative fine and that an audit be conducted into the retailer.
Shoprite’s communications manager, Sarita van Wyk, in a terse statement, said the group was unable to comment “as we
Selling retrenchment and occupational disability covers to penioners is unreasonable
have not yet received any formal documentation from the regulator. Once (it) has been received, the allegations will be investigated immediately.”
The NCR’s Lebogang Selibi said credit providers were required by law to explain the terms and conditions of insurance policies to consumers at the point of sale and that consumers should not be sold insurance that is not suitable or appropriate for their needs.
“The sale of retrenchment and occupational disability covers to pensioners and consumers receiving government social grants is unreasonable and imposes an unreasonable cost because they cannot claim benefits under these covers,” said Jacqueline Boucher, an NCR manager.
Lentus Asset Management portfolio manager Nic Norman-Smith said the incident might be damaging to Shoprite’s brand reputation but the group would take it on the chin.
He said he was not sure if the retailer would be heavily affected by the financial sanction recommended but it was unlikely to be material.
“The reality is that, given the current valuation, it does not take too much bad news to affect the share price,” he said.
Shoprite shares on the JSE fell by 1.12 percent to close at R155.66, which valued the company at R89 billion.
The South African Reserve Bank, the custodian of financial regulation, declined to comment.
According to the group’s annual report ended June, the group received commissions of R695 million, up from R635m last year.
Norman-Smith said the group’s performance was resilient but this incident could have a massive effect on the business’ valuation.