The North Gauteng High Court has ordered Barko Financial Services (Pty) Ltd based in Burgersfort, Mpumalanga to refund consumers after Barko overcharged them in service provider fees.
The court found that the National Credit Act (NCA) does not make provision for the consumer to pay an additional fee which would exceed the prescribed maximum service fee of R50.
The NCA regulates fees in a number of ways which includes specifying the maximum fees that credit providers are allowed to charge and how often the fees can be recovered.
The court ruling comes after the National Consumer Tribunal ordered Barko to stop charging users this excessive fee for processing payments. The National Consumer Tribunal ruling was made in 2011 after the National Credit Regulator (NCR) issued a Compliance Notice against Barko.
Nupay and Barko’s agreement
The service provider fee collected by Barko from consumers is charged for the processing of repayments by Nupay Solutions (Pty) Ltd on credit agreements entered into between Barko and consumers. The court also noted that it is Barko that benefits from the services of Nupay and not the consumers. Approximately 90% of Barko’s consumers use the Nupay system.
Nupay and Barko are independent entities engaged in a business relationship where Nupay provides Barko with management services, in exchange for the payment of various fees.
According to Luke Hirst, managing director of DebtBusters, the National Credit Act states that R50 (plus VAT) is the maximum service fee that can be charged and Barko has to fit the bill for the extra service provided by Nupay.
The 2011 Tribunal found that Barko indirectly induced consumers to enter into an agreement because they are required to pay a service provider fee for processing payments to Nupay.
The Tribunal heard that consumers get to know about Nupay and the AEDO system as a method of meeting their payment obligations in terms of the credit agreements that they enter into with Barko.
The 2011 Tribunal also found that consumers were left with no alternative channels through which to meet their payment obligation to Barko.
According to a statement by the National Consumer Tribunal, the timing of the presentation of the service agreement by Barko employees to consumers, and the fact that the form and appearance of the Nupay agreement is similar to the form and appearance of the prescribed documentation, meant that the consumers were "induced" to enter into the Nupay Service Agreement.
After the 2011 Tribunal ruling Barko took the matter on appeal to the North Gauteng High Court and on 28 March 2013, The High Court dismissed their appeal with costs.
“The High Court has confirmed the National Consumer Tribunal’s ruling that this fee is part of the service fee as prescribed in the National Credit Act and thus, should not be charged over and above the prescribed maximum service fee of R50”, said Nomsa Motshegare, chief executive officer at the NCR.
What are your rights?
Commentators advise consumers to check over the documentation they receive before they enter into an agreement with a credit lender. Fees for all services should be scrutinised.
According to Hirst, it is sometimes difficult to see when you are being overcharged by a credit provider so you need to be cautious when you apply for credit. “Check which instalments you can afford. Many people also don’t check their interest rates and some credit providers will try to charge you the highest rates over the longest period. You need to check and negotiate rates with your credit provider,” he said.