Stellenbosch University's law clinic has submitted a founding affidavit in a proposed class action lawsuit against more than a dozen online loan companies which it says misled consumers into entering into agreements and then launched a "barrage of threats and harassment" against them when they complained or didn't pay.
The law clinic, in court papers filed in the Western Cape High Court, states that 12 websites – with names such as Loan Hub SA, Loan Tracker SA and Loan Scout SA - all use the same modus operandi to mislead consumers: They invite consumers to submit an application for what appears to be a loan, or help in finding a loan - but buried in the small print is a clause that states by submitting the application consumers have in fact entered into an "agreement" with the company for unrelated legal help.
Users are then debited an initial sign-up subscription fee of between R399 and R429, and a recurring order of R99 for 12 months. When they don’t pay, they are met with "stonewalling and threats" and charged penalties.
Threats and harassment
Stephan van der Merwe of Stellenbosch University writes in his founding affidavit that consumers - who believed they had been browsing for loans – are understandably "shocked" to find they are alleged to have entered into an agreement with a company for legal aid.
"The consumers often receive a barrage of threats and harassment from the respondent when they complain or don’t pay," he writes, including threats of blacklisting.
The court documents list two respondents in addition to 17 companies: Damian Malander and Nandie Paich. Malander did not respond to a request for comment sent to one of his email addresses on Monday. Fin24 could not find contact details for Paich. Emails sent to various accounts associated with the online loan companies listed as respondents were not replied to.
Malander previously told Carte Blanche that the loan sites were not breaking the law. "Our sites do not offer loans but a complimentary service for referring people to accredited service providers," he told the investigative journalism series in April 2019, adding that services and charges were visible on "every page of the websites".
Lawyers acting for the respondents, in an email response to Fin24 on Thursday, said: "Our instructions are to oppose the matter, but we cannot offer comment at this point".
Data from the Companies and Intellectual Property Commission show that Malander and Paich are both directors of many of the companies listed as respondents. Most were registered on the same date: May 20, 2015.
Pay back the money
The law clinic intends to move forward with its legal action in two parts. In part A, it wants the court to grant an urgent interdict shutting down the loan websites and stopping them from debiting consumers that have entered into agreements with them. They also want the interdict to restrain the respondents from harassing of threatening anyone for payment.
In the Part B of their application, they want the court to rule that people who have had money debited from their accounts after visiting the online loan websites from May 20, 2015, to date constitute a "class" in terms of a class action application. They then want the court to rule that the loan companies pay back all money debited.
The founding affidavits include emails showing that when consumers did not pay they were sent letters of demand from a group Called Capital Lifestyle solutions, trading as Lifestyle Legal. According to CIPC data, Malander was also a director of this company. The two companies are also listed as respondents in the class action suit.
"We conduct a no-nonsense attitude towards individuals who default on payments," states Lifestyle Legal on its website. "If it is collectable we are sure to collect it." The group did not respond to an emailed request for comment.
In affidavits attached to the clinic's court papers, members of the public detail how they believed they would be helped to find a loan when visiting the websites, not billed for unwanted legal aid.
"I was lead to believe I would in fact be assisted with obtaining a loan," states one of the applicants. "At no time during my interaction with the website was I informed that I was in fact purchasing a legal service package".
The court application is set to be heard on November 27.
* Update: This article was updated on Thursday 26 September to include a response by lawyers acting on behalf on the respondents.