Social grants must be spent on children - not used to qualify for loans
Some parents, both natural and foster, have been stating their child support and foster care grants as income when applying for loans, and at least one money lender was happy to go along with that.
But the National Consumer Tribunal made a finding this week that those grants are to be used solely for the benefit of "third parties" - in other words, the children in those adults' care.
The tribunal handed down a judgment in favour of the National Credit Regulator (NCR) against a Humansdorp micro-lender trading as JMK Cash Loans, finding them guilty of a host of illegal practices, including:
- Charging excessive interest - more than 30% a month, when the legal limit is 5% per month for six months;
- Retaining their clients’ Sassa and bank cards along with their PIN codes;
- Operating despite their registration with the NCR having lapsed; and
- Not conducting affordability checks.
The business was ordered to, within 30 days, pay a fine of R800,000.
It must also appoint an independent auditor at its own cost to determine whether any of its customers in the past three years were overcharged interest, and to refund those amounts which it was not entitled to receive. That auditor is further required to identify loans which JMK Cash Loans granted without conducting affordability assessments, and the NCR may apply to the Tribunal declaring them reckless and thus cancelled.
"It appears that (JMK Cash Loans) has ignored the requirements of the National Credit Act and exploited consumers who appear to lack knowledge about their rights," the tribunal said in its judgment.
It emerged during the joint investigation by Sassa, the Hawks and the Eastern Cape’s consumer protection office that child support and foster care social grants were being regarded as loan applicants’ income.
"This judgment clarifies that child support and foster care social grants are not to be used as consumer income in credit applications," said the NCR’s CEO, Nomsa Motshegare. "Credit providers are warned to observe this judgment."