Edgars’ right to charge club fees under attack again
The National Credit Regulator has applied to the Supreme Court of Appeal to overturn a high court decision on Edcon’s club fees
Edgars’ right to collect more than R450m in club fees from those who buy on credit is under attack again as the National Credit Regulator (NCR) has applied to the Supreme Court of Appeal (SCA) to overturn a high court decision that Edcon’s club fees are lawful.
And Nthupang Magolego, a senior legal adviser at the NCR, says the SCA has granted the regulator leave to appeal against a decision by the Gauteng High Court in favour of Lewis that its club fees are lawful.
In August the Pretoria high court found that the National Consumer Tribunal (NCT) erred in finding that Edcon was not allowed to charge a club fee and that in charging this fee it had engaged in conduct prohibited by the National Credit Act.
In upholding Edcon’s appeal against the NCT’s April 2017 judgment, judge Johan Louw said the club fee charged by Edcon was “clearly” not a cost of the credit extended to the consumer in terms of the credit facility. “Edcon’s credit agreements do not place any obligation on a consumer to pay a club fee. The consumer has a choice whether or not to apply for club membership.”
The tribunal’s judgment stemmed from a complaint by the NCR in 2015 against Edcon for charging customers a club fee on credit agreements. The NCR succeeded in obtaining an order from the tribunal directing Edcon to refund all consumers who were, from 2007 to date, charged club fees, as well as an interdict restraining Edcon from charging consumers club fees in future and an administrative fine in the amount of 10% of Edcon’s annual turnover.
Edcon’s club income for the 2018 financial year was R453m, a spokesperson for the retailer confirmed this week.
The tribunal had argued that the debate was not whether the fee constituted a cost of credit as defined in the NCA, but rather whether the act allows a credit agreement to contain any fee or charge other than that permitted by the NCA.
“There is no section of the NCA that provides for a club fee or anything similar. Any fee appearing on the credit agreement, which is not a fee or charge as described in the NCA, would therefore not be permitted,” the tribunal found.
“It is irrelevant whether or not the fee is presented as a tick box option, can be cancelled, is optional, is not amortised or whether there is a clause specifically excluding the fee from the credit agreement.” Section 101 prescribes the fees and charges that may appear in the credit agreement and a club fee is not one of them, it concluded.
By adding a fee to the credit agreement, Edcon had contravened the section of the act that deals with the cost of credit.
But the high court agreed with the submission made by Edcon that the payment of a club fee is not required in terms of the credit agreement.
“The notion of a cost of credit is the cost of lending money or extending a credit facility,” the judgment says.
“The tribunal correctly found that the fee is for a product that entitles the consumer to various benefits. It can therefore not be a cost of credit or, as was contended by the regulator, in consequence of or pursuant to the conclusion of a credit agreement. The fact that membership can be cancelled by the customer at any time negates that contention.”
The judgment meant that the order of the tribunal was set aside and the complaint by the NCR was dismissed. However, should the NCR be granted leave to appeal, the judgment goes on hold.