regulator warns errant microlenders
31 January 2008

The (NCR) National Credit Regulator threatened to deregister and prosecute nearly 20 microlenders for allegedly flouting the National Credit Act, which was promulgated last year to help regulate SA’s R850bn consumer credit industry.  
The lenders had kept borrowers’ bank cards, pension cards, identity documents and PIN codes, contrary to the act. The credit providers had been given 15 days to comply or to lodge objections with the Nat-ional Consumer Tribunal. This is the first time the regulator had issued such notices to rei n in errant lenders. There are more than 4000 lenders registered with the regulator, of which 2400 are microlenders.

SA’s consumer credit industry is worth about R850bn, of which R30bn is in microloans, said the regulator’s research and statistics manager, Marlene Heymans.  Microloans are short-term loans of under R10000, while consumer credit covers all consumer loans, including personal loans and long-term loans such as home and car loans.

Augustyn said the practice of retaining borrowers’ bank cards, pension cards and PIN codes was illegal. Credit providers who had done this were required to return “all bank and pension cards which are in their possession to all borrowers and to destroy all records of PINs and ATM access information in their possession. “Failure to comply with the notices will result in the matters being referred to the National Consumer Tribunal and the National Prosecuting Authority, which may institute legal action,” he said. The National Consumer Tribunal had the power to impose fines of R1m or 10% of annual turnover on errant lenders. Augustyn said a number of loan sharks were being investigated for operating without licences.  If they were found to be in contravention of the act, they would be prosecuted. The act requires that all credit providers be registered with the regulator.

The act was promulgated last year to dampen ballooning consumer debt. Credit information management company TransUnion was recently issued with a notice after it failed to comply with regulations relating to “data cleansing” under the act.  Augustyn said TransUnion had since complied with the regulations. The regulator warned some of the big lenders this month that they risked prosecution after they had failed to submit quarterly returns.

Regis Nyamakanga, www.businessday.co.za