Picture: FINANCIAL MAIL
Picture: FINANCIAL MAIL

"We’re extremely disappointed‚ and we’re going to fight this with all we have."

This was National Credit Regulator (NCR) senior legal advisor Nthupang Magolego’s response to the news that the National Consumer Tribunal had dismissed the regulator’s case against Lewis Stores for offering its customers extended warranties and club membership‚ for extra fees‚ pushing up the cost of buying furniture on credit.

Two of the three Tribunal members were of the view that because the fees for the extended warranty — overlapping the furniture’s manufacturer warranty — and club membership are reflected by Lewis in a separate "statement of account" rather than being included in the credit agreement itself — as is the case with Edcon’s club fee — it is not a contravention of the National Credit Act.

The NCR is appealing the Tribunal’s judgment.

"Lewis was smart enough not to put those fees into the credit agreement itself‚ but rather into a separate document they call a statement of account‚ but the impact on the consumer is the same‚" said Magolego.

Consumer’s monthly instalments incorporate the extra fees‚ and most do not realise they can choose not to pay the club fee by canceling their club membership‚ Magolego said.

"And if they don’t pay‚ they are listed for the entire amount‚ including the fees‚" she said. "During the hearing Lewis submitted no credible evidence to show that the ‘statement of account’ was a separate contract."

The NCR does not support credit retailers charging consumers a club fee on credit agreements or under any supplementary agreements or documents‚ as it increases the cost of credit.

Last month, Edcon was found guilty of charging hundreds of thousands‚ if not millions‚ to account-holders in an illegal fee for the past decade‚ a ruling the company has since appealed. And last week, the NCR announced that it has referred the Mr Price Group to the Tribunal, following an investigation that revealed it, too, has been charging consumers a club fee on credit agreements.

The NCR is asking the Tribunal to do what it did in the Edcon case — order Mr Price to refund the affected consumers. It wants Mr Price to conduct an independent audit into its loan book to determine the number of consumers to be refunded. It also wants Mr Price to be prevented from charging consumers a club fee on credit agreements and to impose an appropriate administrative fine on the group.

TMG Digital

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