Kuben Naidoo. Picture: BLOOMBERG
Kuben Naidoo. Picture: BLOOMBERG

The South African Reserve Bank has denied requesting an investigation into Capitec’s initiation fees on one of its discontinued loan products.

Capitec’s share price dropped as much as 5% early on Tuesday morning after a media report that the Bank had asked the National Credit Regulator (NCR) to investigate the fees charged when customers first take up the loan. The product allowed customers who had qualified in-branch for one loan, to then take out multiple loans by answering three questions at an ATM. It was discontinued in 2016 after stricter affordability assessment rules came into force.

The Bank’s deputy governor and registrar of banks Kuben Naidoo told Business Day that in the wake of a report into Capitec by short-sellers Viceroy Research in February, which accused the micro-lender of issuing predatory loans, the Bank had asked the NCR to look into the existence of the multi-loan product, and not its initiation fees.

"When I was in Parliament at the end of May, I told the house that of the three issues we identified in the Viceroy report, two of them were our responsibility. The third — regarding whether the existence of the multi-loan product had continued in some or other format — was an issue of market conduct. We stated that, in a meeting with the NCR in February following the publication of the Viceroy report, we asked them to look at that particular issue," says Naidoo.

Bloomberg earlier reported that the Bank had written to the NCR to ask them to investigate the fees being charged on the multi-loan product, which was discontinued in 2016. Capitec chief financial officer André du Plessis said on Tuesday that he was highly surprised to learn of the reported letter and any investigation by the NCR. "I think we would have known about it."

He described Capitec’s interaction with its two regulators — the Bank and the NCR — as being regular and ongoing. "We are subject to reviews by the Bank on an ongoing basis, as is every South African bank. Outside of that, if the Bank wants any specific information they contact myself or Gerrie [Fourie — the CEO] directly."

According to Du Plessis, interaction with the NCR takes place through regular meetings during the course of the year. "Gerrie and the head of risk usually attend those meetings, and they usually advise us beforehand if there is anything specific they would like to discuss or be informed about."

Calls to the NCR went unanswered, but the Sunday Times reported in May that NCR CEO Nomsa Motshegare said the regulator had not found Capitec guilty of any reckless lending. The regulator was, however, concerned about the number of loans issued by the bank to consumers within a specified period of time.