By Nicolette Dirk, financial writer, justmoney.co.za
African Bank was fined R20 million by the National Credit Regulator (NCR) last week (Friday October 4). African Bank and The National Credit Regulator (NCR) came to an agreement that resolved months of disputes after the regulatory body called for a R300 million fine to be imposed on African Bank for reckless lending earlier this year.
This settlement follows a recent report by the NCR that revealed that the number of credit active consumers with impaired records in South Africa increased by 161 000 from 9.53 million to 9.69 million quarter-on-quarter.
Nomsa Motshegare, CEO of the National Credit Regulator (NCR), warned consumers to live within their means and to use credit responsibly.
What were African Bank’s transgressions?
Initially the NCR called for a fine to be imposed on African bank for reckless lending. It was the first time the NCR referred a bank to the National Consumer Tribunal, and R300 million is the biggest fine the regulator had asked for.
The NCR also wanted African Bank's branch in KwaZulu-Natal to be suspended from granting credit for 12 months.
Terms of the settlement
In settlement agreement, African Bank agreed to write off the loans, refund consumers, rescind judgments taken against consumers, remove judgment and adverse information listings from the credit records of consumers and develop an active engagement process with the NCR.
In settlement agreement, African Bank agreed to write off the loans, refund consumers, rescind judgments taken against consumers, remove judgment and adverse information listings from the credit records of consumers and develop an active engagement process with the NCR.
In a statement, African Bank said these matters have been withdrawn from the NCT with immediate effect. “The financial impacts of these matters, except for the settlement amount of R 20 million were fully incorporated in the earnings guidance given in the Trading Statement on Results to 31 August 2013, released on 18 September 2013,” said African Bank.
African Bank further stated that they supported the processes initiated by the NCR and all other regulators, and will continue to play an active role to ensure that the credit industry further develops in a responsible and effective manner.
Reckless lending clamp-downs
Earlier this year the NCR referred an investigation into Capitec Bank Holdings to the National Consumer Tribunal. The NCR alleged that Capitec was in contraventions of credit laws.
Despite these allegations, Capitec maintained that they applied the most conservative credit criteria in the unsecured credit industry.
According to Business Day, Capitec lent R7.8 billion to new customers, a 58% jump from last year. But Capitec hit back in a statement saying that bad debt ratios at the bank have been of the lowest in the industry for the past eight years.
“This is furthermore seen in the low pricing of credit extended. The bank has always aimed at decreasing the cost of credit to the market and the only way to achieve this is to target the lower risk client segment in the market,” said Capitec.
If you wish to report an incident of reckless lending call the NCR on 011 554 2600 or email complaints@ncr.org.za