NCR refers Lewis to National Consumer Tribunal

Cape Town - The National Credit Regulator (NCR) has referred Lewis’ operating subsidiary, Lewis Stores, to the National Consumer Tribunal for alleged breach of the National Credit Act (NCA).

Lewis and its external legal counsel believe that the allegations are without merit and will oppose the referral.

Lewis Group [JSE:LEW] advised shareholders that the referral relates to the costs charged by Lewis Stores under certain maintenance agreements concluded with its customers since 2007. It is alleged that customers were provided with extended warranty cover, in addition to the cover available to them in terms of supplier and manufacturer warranties for the same period.

It also relates to certain club membership fees charged by Lewis Stores since 2007. The NCR alleges that the maintenance costs and club fees were charged to customers in contravention of the NCA and requests the tribunal to order Lewis Stores to repay the maintenance costs and club fees to customers.

The NCR further requests that the tribunal restrain Lewis Stores from charging maintenance costs and club fees to customers in what it deems to be an unlawful manner in future and seeks certain ancillary relief. This relief includes the imposition of an administrative fine of 10% of the annual turnover of Lewis Stores.

In March Lewis Group completed the acquisition of a portfolio of 57 Ellerines and Beares stores in four southern African countries. This expands its store presence outside SA to 120 and follows regulatory and competition approvals in each of these countries for the R250m acquisition announced in November 2015. The stores are located in Namibia (21 stores), Botswana (20), Lesotho (10) and Swaziland (6).

In February 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’s 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.”

Fin24 reported in July last year that a mystery shopping experience by Summit Financial Wellbeing, a company which fights for consumer rights and lobbies for change in the financial services industry, uncovered what it deemed to be major breaches of the National Credit Act (NCA) by Lewis Group.

By late afternoon trading, Lewis' share price was up 0.48% on R50.

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