Fraud watchdog wins case against National Credit Regulator

An anti-fraud body is allowed to keep what it deems important fraud information for a period of up to 10 years, the Supreme Court of Appeal has ruled.

On June 3, 2019, the court upheld an appeal by the Pretoria High Court about the matter involving the Southern African Fraud Prevention Services (SAFPS) and the National Credit Regulator (NCR). 

The NCR is a statutory body which regulates the credit industry, to promote a fair marketplace for access to credit, while prohibiting unfair credit practices. 

The SAFPS is a non-profit organisation started in 2000 by major banks to combat fraud. Its members include credit providers, insurance companies, SARS, the Financial Intelligence Centre and the SA Reserve Bank. 

The agreement between the SAFPS and its members is that when fraud is detected in the normal course of business, it must be reported to the SAFPS within two days of the detection. The information is then kept in the SAFPS' database for use by its members. Members can use the information before embarking on commercial transactions or making employment decisions. 

The NCR's dispute is related to the length of time the information is kept.

As far back as March 2015, the NCR approached the National Consumer Tribunal, as it was of the view the SAFPS was contravening the National Credit Act by keeping credit information of consumers for up to 10 years. The NCR contended that the credit information could not be retained for more than one year, as provided for in the National Credit Act.

The Tribunal upheld the NCR's contentions and made a declaratory order in that regard, but declined to fine the SAFPS.

'Protect fraudsters, not victims'

The fraud watchdog approached the high court to appeal the Tribunal's ruling, and succeeded. The NCR had then appealed the high court's decision, and the matter was heard on May 22, 2019.

The SCA found no contraventions of the National Credit Act and dismissed the appeal.

Judges Ashton Schippers and Malcolm Wallis reasoned that the Tribunal's interpretation of the National Credit Act was"patently insensible" and "unbusinesslike", cutting across the purposes of the National Credit Act.

"It would undermine the ability of the finance industry to protect itself from fraud and in doing so, protect fraudsters and not victims of fraud; it would not promote a responsible credit market and industry; and it would not protect consumers," the judgment read. 

Manie van Schalkwyk, executive director of the SAFPS, welcomed the judgement and viewed it as a "vote of confidence" in the work of the SAFPS. "In the same breath we recognise the very important work of the NCR and will continue to support the regulator with our efforts to fight fraud and financial crime and protect consumers against fraudsters," he said.  

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