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Shoprite found guilty of reckless credit lending

‘The level of over-indebtedness in the market would indicate that it’s probably not limited to Shoprite,’ says Roy Stocker from the National Credit Regulator.

NOMPU SIZIBA: In December 2019 the Pretoria High Court upheld a ruling by the National Consumer Tribunal that Shoprite must pay a fine of R1 million. This was as a result of the National Credit Regulator conducting an investigation which found that Shoprite had engaged in reckless lending to its customers, the majority of whom are said to have been elderly and low-income earners, vulnerable people in society.

Well, to tell us more, I’m joined on the line by Roy Stocker, the senior legal advisor to the National Credit Regulator. Thanks very much, Roy for joining us. What prompted the National Credit Regulator to investigate Shoprite’s lending practices?

ROY STOCKER: Hi there. Well, it started out simply as the regulator came out with normal enforcement functions and monitoring functions of the credit market. We were in fact conducting a statistical exercise when we picked up some issues in a number of credit-providing affordability-assessment processes and procedures. One of the credit providers that we identified was Shoprite, and that led us to initiating a full investigation.

NOMPU SIZIBA: What were the key findings of the investigation into Shoprite?

ROY STOCKER: Well, what we’d found is that Shoprite would carry out an affordability assessment. It was quite diligent in that respect. It would calculate a consumer’s income, it would calculate the consumer’s expenditure, it would obtain all the necessary documentation, such as credit bureau reports. Then, quite strangely in fact, it would then, after it had made a calculation of the consumer’s disposable income available, it would use some creative methods to try and create affordability for a consumer when there was none.

NOMPU SIZIBA: So it basically did some jiggery-pokery in the whole thing?

ROY STOCKER: More or less, yes. Just one example, one of the consumers had a negative disposable income of more than R9 000. In other words, the consumer’s expenditure was already more that their income, and [he or she] was already over-indebted. Then Shoprite would take into account strange factors, like the consumer was married and it [Shoprite] would just make the assumption that the consumer’s spouse would be able to contribute without actually investigating what the spouse’s income was, or anything to that effect.

NOMPU SIZIBA: The R1 million is hardly going to penalise Shoprite, but what’s interesting to me is that the National Consumer Tribunal ruled that Shoprite must appoint a debt counsellor for those clients who were identified as potential victims of reckless lending. Does this then mean that Shoprite runs the risk of not being repaid by those clients if, in their individual cases, it’s found that Shoprite was reckless?

ROY STOCKER: It depends on the assessment that the debt counsellor will make. What the debt counsellor can do is either make a decision to set aside the consumer’s repayment obligations, or simply suspend it to give the consumer some breathing room to repay those debts. But it will depend on the assessment made by the debt counsellor.

NOMPU SIZIBA: Roy, do you think that this conduct is limited to Shoprite or is the NCR casting its investigative net wider to other retailers?

ROY STOCKER: We are always monitoring the market, and if we receive complaints we do investigate those. The level of over-indebtedness in the market would indicate that it’s probably not limited to Shoprite, and we will investigate and prosecute wherever we find other retailers contravening the act.

NOMPU SIZIBA: It does seem crazy that a lender would look to lend to those people [whose] conscience may struggle to meet their financial obligations, especially in the case in pensioners and those on low incomes.

ROY STOCKER: Yes, it confounds you and me both. I think this is a question that could be best put to some others. But perhaps there are some – and I’m speculating here – inappropriate incentive scheme for the various branches; or I don’t know what could prompt [them] to do this.

NOMPU SIZIBA: I understand that the NCR is appealing to consumers out there, if they feel that they’ve been victims of reckless lending, to get in touch with the organisation. Where can people make contact?

ROY STOCKER: The best way to make contact is to send an email to complaints@NCR.org.za.

NOMPU SIZIBA: Okay, super. Alright, Roy, very interesting revelations from you on that one. Thank you very much for your time, sir.

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Victims of reckless lending?

I wonder if the person is not perhaps a reckless borrower? In the end there is only one person who knows if he can afford to borrow money, and that is the borrower himself.

Very simplistic comment here. One cannot be a reckless borrower if there is no reckless lender. In this case the lender actually fiddled the docs so …

Mr. Stoffel. With respect, your comment is rather perplexing. Surely, if you are the “provider” in your household and the taps run dry, you will try your luck and try borrow money (whether it is from family or Shoprite). Micro lenders unfortunately do not lend money to uplift consumers and consumers must be protected against reckless lending as well as themselves. R1m fine is laughable.

My domestic helper, normally a very level-headed lady who has only once borrowed money from me in 10 years, nearly fell into this trap last year. Cold called by a well-known bank, she agreed to borrow R 20 000. She had not solicited the loan and had no clear need for it. She also knew she could always approach me in need. She was told she could “renovate her house”. All documents completed, I was requested to confirm employment. She was agast when I read the agreement and explained the interest, etc. It had not been explained to her properly by the institution. As the only breadwinner in a family of five, this would have devastated her and she was definitely in no position to borrow even one cent. I sent them an email threatening to drag them to every possible body for reckless lending and to terminate her employment. She heard nothing more. Hard as it is to understand, the idea that someone would lend you a large amount of money, if you are poor, seems flattering and therefore alluring. Poor people should not be exploited in this way.

Banks and micro lenders are gangsters.

…Tell us something we don’t know.

It’s robbing the poor to feed the rich i.e. lend money to the poor and high interest rates so that the rich can benefit.

If there was no credit in the world workers wages would have to be higher to be able to afford the goods and services the world economy produced.

Credit is a modern day form of enslavement. Once you have a lot consumer debt you working for free i.e to pay off the rich who lend you the money.

Credit was nice name the financial industry gave to debt. A credit card real name should be a debt card.

One does not have to buy ALL the goods and services the economy produce? One must live within your salary.

Chris Stoffel you are right. I had a conversation with a micro lender one day. he told me that a lender want to borrow. If they ask him if he’s got other debt he lies and say no, he don’t. Then follows missing payments and the legal actions and….

AfriqueDS you are right. a Colleage told me he stood watching a micro lender and a client. On pay day the client comes to the shop, the lender will take the client’s bank card out of a drawer and walk with him to the teller machine. The client withdraw his pay and pay the lender just there. IMMEDEATELY the microlender will “pressure-lend” the client in a new loan.

Yanni you are wrong. There are responsible borrowers, lenders and banks.

a Possible solution?
(1) The first mentioned lender told me he and colleauges spoke to the Reserve Bank and asked that everybody’s loan amounts must be on a data base. Take note – said data base is only for loans. He can then see that his client want to borrow but his total debt at other banks plus lenders is by far overextended for his salary.
The Reserve Bank refused.
(2) realy hammer the guilty bussines owner who abuse the poor borrowers.
Example – a certain offsales lquer shop will sell a sandwich for R50 “on the book” and the byer receive a bottle of wine for free. At the end of the month said byer’s account for sandwiches was some hundreds of Rands. The shop was told buy a member of the public to stop immediately or face the conseqeunces. The same member told the “sandwich buyers” they don’t have to pay their debt to the offsales because that transactions were illegal.

Mr. Speaking. I concur with you.
One would like to know what are these borrowers buying?

One of my workers had over R100 000.00 debt. They nailed him. Sad thing was that most of the debt was clothing accounts. But, his daughters dressed real smart!!!!!

@Logically speaking

… a Colleage told me he stood watching a micro lender and a client. On pay day the client comes to the shop, the lender will take the client’s bank card out of a drawer and walk with him to the teller machine. The client withdraw his pay and pay the lender just there. IMMEDEATELY the microlender will “pressure-lend” the client in a new loan.

Isn’t this what the overdraft does too?
Credit card, Revolving credit, access bond, etc…. Debt is debt no matter what the form, colour, shape or size.

End of comments.

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