Lewis faces fine for breaching National Credit Act

Cape Town - Lewis Stores has been found guilty of infringing the National Credit Act (NCA), relating to credit insurance and disability cover sold to pensioners and self-employed consumers.

"The NCR [National Credit Regulator] considers this a great victory and will be returning to the NCT [National Consumer Tribunal ] to argue the imposition of a fine on Lewis Stores," said Jacqueline Peters, NCR manager for investigations and enforcement.

In July 2015 Lewis and Monarch Insurance Company were referred to the NCT for alleged breaches of the NCA, following an investigation by the NCR.

It revealed that loss of employment cover as part of credit insurance was sold to pensioners and self-employed consumers; and disability cover as part of credit insurance was sold to pensioners.

Peters said the basis of the NCR’s referral was that the sale of loss of employment cover to pensioners and self-employed consumers was unreasonable and imposed an unreasonable cost on such consumers.

The same applied to the sale of occupational disability cover to pensioners where they no longer had an occupation.

The NCR in a judgment handed down on Wednesday agreed with the NCRs’ submissions and found that Lewis:  
 
- had acted unreasonably by offering or demanding pensioners or unemployed consumers to take out loss of employment insurance;
- had acted unreasonably by offering or demanding pensioners to take out disability insurance;  and
- was guilty of prohibited conduct for breaching the National Credit Act 34, 2005.
 
The NCT interdicted Lewis from engaging in this conduct in future.

It also ordered that an independent audit be conducted on all credit agreements entered into by Lewis since 2007, adding that all affected consumers, identified in the audit, be reimbursed the premiums paid for the insurance.

In October last year, Lewis Group announced it is refunding R44.1m to a group of its customers for the cost of loss of employment insurance mistakenly sold to them, together with R23m in interest accrued on this amount.

Loss of employment insurance cover is used to settle customers’ outstanding balances on their credit agreements in the event of their retrenchment or redundancy. Pensioners and self-employed people cannot be retrenched, and are, therefore, not eligible for such cover. The sale of such cover to such persons should not have occurred.

Group CEO Johan Enslin said at the time the refund followed its own "extensive internal investigation", which was triggered by the NCR bringing to its attention three such instances.

“As a result of human error at our stores, loss of employment insurance products were sold to pensioners and self-employed customers contrary to our company policy,” Enslin said at the time. “The issue relates to less than 1% of all insurance premiums earned by the Lewis Group since 2007.”

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