Retail giant Shoprite was fined R1m by the National Consumer Tribunal for breaching the credit act after it was found to have lent recklessly to vulnerable consumers.
The judgment was handed down in the Pretoria high court on December 18 and publicised on Tuesday by the National Credit Regulator.
The regulator investigated Shoprite’s lending practices in 2014 after media reports of retailers lending to people who could not afford debt. The matter was referred to the tribunal, which found against the retailer in 2017.
But Shoprite appealed in the high court against the tribunal's ruling on technical grounds.
On Tuesday, Shoprite said it noted the judgment and had already “processed the payment of the fine ... for extending credit to some of its customers too easily”.
A judgment penned by Judge Nomonde Mngqibisa-Thusi detailed examples of how Shoprite extended credit to consumers whose monthly debt repayments exceeded their salaries.
One consumer had monthly debt of R9,888 after pay day and his loan from Shoprite increased that to R10,113.77. Shoprite said the fact he was married and his wife could assist was taken into account when approving their loan.
The court ruled that the “assumption that the spouse will stand in is speculative to say the least”.
In another case, a pensioner named only as Potgieter had no monthly disposable income and debt of R810.65 before applying for the loan. Shoprite granted her credit.
Potgieter defaulted, and Shoprite repossessed goods from her but she was still in arrears of R3,977.66, which the court said “Shoprite demanded”.
The court found Shoprite had “readjusted” consumers’ financial information to show they could afford debt when it was clear they could not.
The high court found it “astonishing” that even after “adjusting” customers’ data, consumers “still had negative affordability figures” yet Shoprite granted them credit.
Shoprite was also ordered to provide debt counselling and payment restructuring to vulnerable debtors.
The group said in a statement that the “matter relates to credit agreements concluded in June 2013 and June 2014 with nine consumers from among thousands”.
It said all nine paid their debt in full, and its affordability assessment processes had been replaced in September 2015 with a new system aligned with the National Credit Amendment Act.