Club Fees Not Permitted
The National Credit Regulator (NCR) has referred the retailer, Edcon Holdings to the National Consumer Tribunal (NCT) for charging consumers club fees on credit agreements – a practice “…not permitted by the National Credit Act (NCA)”.
Popular clothing outlets, Jet and Edgars form part of Edcon, which is controlled by US private-equity firm, Bain Capital Partners that acquired the retailer in 2007.
The NCR has proposed that Edcon be fined, instructed to refund wronged consumers and be prohibited from charging club fees going forward.
The club fees charged are linked to store cards issued to consumers for the purchase of clothing on credit at Edcon franchises. The regulator’s Johannesburg branch disclosed that, by charging these club fees, Edcon is acting in breach of the NCA.
Statement and Response
The regulator’s acting manager of investigations and enforcement‚ Jacqueline Boucher stated that “The NCA allows consumers to be given a quotation which sets out the cost of credit before signing credit agreements,”
“Consumers should request this quotation from their credit providers so that they can properly check the cost of credit that is being offered.”
Edcon responded that their “…legal team [was] studying the Notice of Motion and the supplementary documents to better understand the Regulator’s position,” and that it “…will issue a statement at the appropriate time,”
“Club is an optional product, which is in no way a condition of any credit agreement, that prospective and existing credit customers can sign up for.”
Burdened by Debt
Since last year, Edcon’s losses have spiralled from R499 million to R828 million in the first quarter of 2015 ended June. The retailer is burdened by over R20 billion in debt.
This referral of Edcon comes less than a month after the NCR referred Shoprite Holdings, the biggest food chain in South Africa, to the tribunal for reckless lending on 14 October 2015.
In its statement, the NCR affirmed that it “…will continue to conduct industry-wide investigations on the cost of credit to root out illegal charges and fees that consumers are charged.”