Capfin and Cash Converters in hot water with the regulator
The National Credit Regulator (NCR) has told Justmoney that it has filed an application to cancel Capfin and Cash Converter’s registrations following complaints from consumers.
According to reports, a Gauteng based domestic worker, is one of complainants that has lodged a complaint with the regulator against Capfin and Cash Convertors for reckless lending. She alleged that she was granted credit by both companies, despite already being in debt with other creditors.
Capfin is a wholly owned subsidiary of Southern View Finance UK Limited (SVF). In a SENS announcement, SVF admitted that it is involved in ‘significant litigation proceedings’.
Allegations brought by 25 consumers include reckless lending, that the company misinformed a customer about the interest rate, and that it had not conducted proper affordability assessments.
The matter is now being heard by the National Consumer Tribunal (Tribunal).
When approached for comment Merwe Scholtz, chairmain of SVF, told Justmoney: “At this stage I can tell you the NCR applied to the South African National Consumer Tribunal for the cancellation of Capfin’s registration as a credit provider on the basis of alleged contraventions of the provisions and regulations of the NCA, as well as of Capfin’s license conditions.
“The NCR alleges that Capfin did not properly conduct an affordability assessment in respect of 25 consumers to whom it advanced unsecured loans in the period October 2013 to January 2015 and that, in one instance, it incorrectly disclosed the interest rate applicable to the loan as an annual rate instead of a monthly rate.
“Capfin takes its obligations under the NCA seriously and respects the authority of the NCR. At the same time we are confident that our processes and procedures comply with all the required provisions and regulations. We do not believe that Capfin’s business model results in reckless credit being granted to consumers. We intend demonstrating to the Tribunal that we conduct an appropriate affordability assessment before loans are advanced. From our side we are keen that this matter be resolved as quickly as possible.”
Cash Convertors has also been accused of lending the domestic worker money without conducting a thorough credit check. Mashapa revealed that Cash Convertors has also been referred to the National Consumer Tribunal “based on an investigation into their lending practices.”
CEO of Cash Convertors Richard Mukheibir explained that the company cannot provide the confidential information about a customer.
“We are in the process of investigating this particular loan to determine whether the correct process was followed in the above example. Once we have ascertained all the details we will revert with our findings,” said Mukheibir.
Mukheibir revealed that the PayDay Advance product from Cash Convertors is a short term loan that is usually of less than a one month duration, which is taken out against a consumer’s next salary payment.
Mukheibir told Justmoney: “The National Credit Act (No. 34 of 2005), places an obligation on the credit provider to prevent reckless credit (Section 81). The Act goes further and allows the credit provider to determine for itself the "evaluative mechanisms or models and procedures to be used in meetings its assessment obligations".
Cash Converters has developed a proprietary assessment mechanism.
“The PayDay Advance application used by Cash Converters is a parameter and process driven application that is designed to guide the operator (staff member) through the process of a loan assessment to ensure that they follow and meet the requirements of the Act with regard to the prevention of reckless credit. In addition to this the application keeps all electronic records of the process and has a full audit trial of the process and any changes.
“The applicant submits standard documentation being their latest payslip, three months bank statements, proof of address, South African identity document and alternative contact details. With this information, and their coming financial commitments, Cash Converters assesses the affordability of the loan to the consumer.”
What is reckless lending?
Reckless lending is defined by the NCR as “a credit provider giving a loan to a consumer without assessing affordability or where the loan makes the consumer over-indebted.”
Mashapa has said that the complaint [from the domestic worker] against Capfin is being investigated. “The matter is currently pending at the [National Consumer] Tribunal. The NCR [has] requested the Tribunal to cancel the registration [of Capfin].”
An article in Personal Finance over the weekend claims that since January 2013, the domestic worker had been granted a total of nine microloans from Capfin.
It is alleged that the initial loan was for R1 500, but after paying the first few monthly instalments, Capfin approach her with the offer to take out a further loan of R1 000.
The worker told Personal Finance: “Since 2013, they’ve been doing that; you don’t finish the loan.” She claimed that when the last loan was granted in December 2014, she was already more than five months in arrears on her Jet and Ackermans store accounts. Marthie Horn, manager of legal and compliance at Capfin, told Personal Finance that there is no trace of an enquiry because the company conducted a batch process, which would not leave a trace on an individual’s credit report.
This is not the first time Cash Converters and Capfin have landed in hot water with the NCR. In December 2014, action was taken against Cash Convertors by the NCR. Mukheibir said: “With regard to the specific case brought by the NCR late last year against Cash Converters, we can confirm there is a scheduled tribunal hearing on 27 February 2015 to resolve this matter. We will be more than happy to comment once the matter is resolved.”
Meanwhile, in August 2014, the NCR issued a compliance notice to SVF for alleged contraventions of the National Credit Act, click here.
For more information, click here.
Requirements when applying for a loan
When you apply for a loan, Mashapa explains that the credit provider is required to ask for certain documentation, in order to ensure that you can afford to take out a loan. This documentation includes:
· Proof of income, such as a salary slip,
· The amount of living expenditure,
· Credit bureau reports,
· Water and lights account,
· Cost of school fees, and
· Bank statements
Amendments to the National Credit Act have been signed into law, but the exact date for implementation has not yet been revealed.
However, Mashapa notes: “The requirement of affordability assessment has been [strengthened]. The lenders will be required to obtain, for example, proof of income and credit bureau reports.”
Mashapa added: “Consumers must be truthful at all times when applying for loans and provide accurate information about their financial position, especially income and living expenses. If they provide incorrect information to credit providers about their financial status, this be used by credit providers as a defence against an allegation of reckless lending.”