Lucky break for clients who don’t have to pay back unlicensed lender

2013-02-17 10:00

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In a ruling that is the first of its kind, the National Consumer Tribunal has imposed a cash fine on an unauthorised lender and ruled that its clients do not have to pay back their loans.

The tribunal imposed an administrative fine of R900?000 on Werlan Cash Loans and declared its credit agreements unlawful. Werlan Cash Loans is situated in Winburg, in the Free State.

Nurunisa Soobrayan, the National Credit Regulator’s legal adviser for investigations and enforcement, told City Press the regulator had asked for the maximum R1?million fine or 10% of the company’s annual turnover, but was happy with the tribunal’s decision.

Soobrayan said they could not say how much Werlan stood to lose because it was not registered as a lender and therefore did not furnish its financial statements to the regulator.

This follows an investigation conducted by the regulator into Werlan Cash Loans, which revealed that the lender was required by the National Credit Act (NCA) to register as a credit provider with the National Credit Regulator, but it was not registered at the time of concluding its credit agreements.

The NCA requires a credit provider to register with the regulator if it has reached a specified number of credit agreements with consumers or when the total principal debt owed under all outstanding credit agreements exceeds R500?000.

“It is important that credit providers ensure they register with the National Credit Regulator as a credit provider as soon as they have 100 credit agreements or an outstanding loan book of R500?000,” Nomsa Motshegare, chief executive officer of the regulator confirmed.

“This will prevent a situation where their credit agreements are declared unlawful and they are unable to collect on them,” said Motshegare.

The tribunal’s decision is the second major one to have an impact on the unsecured lending space in two weeks.

Last week, the tribunal imposed a R300?million fine on South Africa’s largest unsecured lender, African Bank Investments.

The bank has, however, threatened to take the regulator to court should the tribunal agree to its proposal of a R300?million fine for fraudulent lending.

African Bank was contesting a fine relating to the manipulation of the bank’s “affordability calculations” which affected “397 customers and loans to the capital value of R15.5?million”.

In its report, the bank said that following an internal investigation three agents were dismissed for fraud when it was discovered they had colluded with customers and made illegal payments to agents in return for granting loans.

The regulator’s recommendation of a R300?million fine is possibly the largest proposed sanction in the regulator’s history.

African Bank chief executive Leon Kirkinis blamed complex syndicates that “fraudulently designed payslips, bank statements and identity documents to manipulate affordability calculations”.

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