In a recent SENS statement released by the Lewis Group, it has announced that Lewis Stores and Monarch Insurance Company (both subsidiaries of the Lewis Group) will be challenging their referral to the National Consumer Tribunal.
The Lewis Group pointed out that in its referral, the National Credit Regulator (NCR) alleged that Lewis and Monarch sold “insurance policies providing loss of employment and disability cover to pensioners and self-employed consumers” who, according to the National Credit Act (NCA) are “not entitled to the benefits provided thereunder.”
Furthermore, the NCR application to the Tribunal states that these insurance policies “were for that reason unreasonable or were sold at an unreasonable cost to the relevant consumers and that Lewis and Monarch sold such cover with the intent to defraud such consumers.”
Opposing the referral
Lewis and Monarch are opposing their referral to the Tribunal, and have raised several “challenges to the procedures adopted by the NCR preceding and during the investigation and referral of the complaint, including, but not limited to, the failure of the NCR to properly consider the complaint, the failure to conduct a proper investigation as required by the NCA, the failure to properly engage with Lewis and Monarch, the absence of jurisdiction on the part of the NCR and the Tribunal over Monarch and the absence of any rational connection between the complaint made, the investigation undertaken by the NCR and the referral made by the NCR to the Tribunal.
“Lewis and Monarch have in addition drawn the attention of the Tribunal to the unlawful public disclosure of confidential information by the NCR,” stated Lewis.
‘Fraudulent’ sale of insurance
According to Lewis, “it is patently untrue and there is no factual basis of any kind to the allegation made by the NCR that the sale of loss of employment insurance by Lewis to pensioners and self-employed persons, was fraudulent and deceitful, and was done with the intention to defraud consumers.”
In June 2007 Lewis conducted an internal investigation, where it discovered that a small percentage of pensioners and self-employed people were sold loss of employment insurance “through human error and contrary to Lewis’ own internal policies, which expressly prohibit the sale of such policies to such consumers,” explained Lewis.
The company is currently determining the amount of premiums, including interest that needs to be refunded to customers, either by crediting current customers’ accounts, or where transactions have been concluded repaying the customers.
“Although the calculation exercise has not been completed, shareholders are advised that Lewis estimates that an approximate amount of R46 million in premiums and interest of R23 million, will be refunded to consumers,” noted Lewis.
Lewis denied that the sale of disability insurance to pensioners and the self-employed is a contravention to the NCA. It highlighted that “claims by pensioners and self-employed persons in respect of disability have been and continue to be honoured by Monarch.”
Lewis added that “as part of a credit agreement it is a requirement that the merchandise be insured and that the purchaser takes out credit life cover while there is money outstanding to the credit provider. Lewis customers are given the option to provide their own insurance policies and they are not obliged to take up the Lewis insurance offering. The cost of this insurance cover is fully disclosed to the customer and included in the total cost of credit. Death, disability, retrenchment and product cover are offered separately and the cost thereof is disclosed individually.”
Lewis address misleading information
The Lewis Group has claimed that recent media reports have “contained false and misleading information.” In order to address this, the company has explained how several of its practices function, such as credit checks and affordability assessments.
According to the recent secret shopper experience that was conducted by Summit, the store did not carry out the necessary affordability assessment correctly, changing some of the customer’s information to ensure that they would get the loan required to purchase the item.
However, in a statement, Lewis stressed that the company carries out all necessary affordability assessments, as is required by the NCA.
“Comprehensive affordability assessments are undertaken in relation to all customers applying for credit, as required by the NCA. This includes applying Lewis data, credit bureau information as well as the customers’ data and living expenses. Customers are required to supply personal identification, and proof of income and living expenses. Credit applications are transmitted to the Lewis Group head office where credit application scorecards (for new customers) and behavioural scorecards (for existing customers) are applied,” said Lewis.
It added: “All customers are referenced at the credit bureau taking into account the applicants’ payment record with other providers to ensure that risk and affordability assessments are current. The living expenses are checked for reasonableness against the company’s internal data table. The decision to grant or reject the application is then taken. Lewis has proven to be resilient through the recent downturn in the credit cycle and has responsibly declined more than 40% of all credit applications.”
Another allegation made during the secret shopper experience was that the store’s staff did not fully disclose all the costs involved in taking out credit, as well as how the ancillary charges were factored in.
According to Lewis, ancillary charges such as extended warranties are not compulsory (which contradicts what the secret shopper claimed the staff told him). “Customers can choose to buy an extended warranty at the time of making a purchase. The extended warranty is offered by Lewis and comes into effect after the supplier’s warranty has expired,” explained Lewis.
The company also claimed that it is transparent about the total cost of credit on all contracts. This entails: “Including the cost of merchandise, interest charges and any other charges including, where applicable, credit life insurance, product insurance, delivery fees, extended warranties and club membership,” revealed Lewis.
“The store manager interviews customers before a credit agreement is completed and in terms of the NCA the key elements of the contract, the total cost of credit and affordability are explained. The total cost of credit is disclosed in all marketing communications and in-store promotional material,” added Lewis.