CONSUMER TRIBUNAL FINES UP MONEY R1 MILLION FOR RUNNING PYRAMID SCHEME

THE NATIONAL Consumer Tribunal (NCT) has fined Up Money R1 million for conducting a pyramid scheme, which is illegal. Up Money had promoted its scheme as a stokvel. A stokvel is a savings or investment society to which members regularly contribute an agreed amount and from which they receive a lump-sum payment. It was given 20 working days to pay the fine. The National Consumer Commission had referred Up Money to the tribunal following its investigation into allegations that Up Money was a pyramid scheme, it said yesterday in a statement. The Consumer Protection Act (CPA) describes a pyramid scheme as an arrangement, agreement, practice or scheme if participants receive compensation derived from their respective recruitment of other persons as participants, rather than the sale of any goods or services, it said. The Deputy Minister of Trade, Industry and Competition, Nomalungelo Gina, said the department welcomed the decision by the tribunal, which sent a strong message to South Africans not to promote, join or participate in any pyramid scheme. “While Up Money promoted its scheme as a ’stokvel’ to lure participants during the pandemic, the tribunal confirmed that it was not a stokvel but a pyramid scheme, as its operation fits the description of a pyramid scheme as provided under section 43 of the CPA. Up Money’s business model was unsustainable, as it relied heavily on new participants feeding into the scheme,” said Gina. Acting National Consumer Commissioner Thezi Mabuza said: “Pyramid schemes are prohibited in South Africa. Pyramid schemes continue to mushroom on a daily basis, especially on social media platforms and consumers continue to lose their hard-earned money.” |