CAPE TOWN – Ten of the 13 micro-lenders operating in Marikana are operating illegally and are contravening provisions of the National Credit Act. This follows an investigation into their business practices by the National Credit Regulator.
They are guilty of charging excessive interest; charging illegal fees; retaining bank card cards, pin numbers and ID documents; not doing adequate affordability tests; not disclosing the cost of credit, getting consumers to sign blank process documents and reckless lending.
In addition investigations into reckless lending practices of two banks have been concluded. They were found to have loaned money recklessly and enforcement action will be taken.
This is according to Nomsa Motshegare, CEO of the National Credit Regulator (NCR), who along with Trade & Industry minister Rob Davies, was briefing journalists in parliament on Thursday.
Motshegare would not disclose the names of the micro-lenders or banks involved, not until “due processes” have been completed. However, she said a number of arrests had already been made.
Overcharged consumers will be refunded, she says.
This followed a blitzkrieg style operation which was launched by the NCR on Monday, and reported by Moneyweb.
The investigative work of the NCR has the full backing of the dti which is concerned by what Minister Davies refers to as “unwarranted preying on the vulnerable”. He noted that these practices were not confined to Marikana. Investigations will be extended to other small towns in other provinces in the coming months.
“We believe that the pressure on [Lonmin] wage demands was influenced by high levels of unsecured credit,” Davies says. “The very high levels of interest eat into salaries and have a negative impact on our working people, our low income consumers and our society.”
Davies noted that indebtedness was not the sole reason underpinning the Marikana strikes. “There were many causal factors including working conditions and housing that were part of the problem. But in our neck of the woods we have found a problem. It is important that the NCR acts, and it will do so without fear or favour.”
The spirit of the National Credit Act is about responsible lending which takes into account the ability of the borrower to repay the loan, added Advocate Zweli Zakwe, head of the investigations unit at the NCR. “We are seeing practices that verge on reckless.”
At this stage the NCR cannot be specific about the level of indebtedness in Marikana. South Africa’s gross debtors book is worth R1.3trn, which includes car and house finance. About 9% of this amount relates to unsecured finance. And roughly 49% of borrowers in this category are impaired, says Motshegare.
“What we can tell you is that when you have 13 micro-lenders in a small town like this, the overall level of borrowing and resultant indebtedness is much too high,” says Davies.