Shoprite found guilty of reckless lending

The Shoprite group has been found guilty of reckless lending and fined R1-million for approving furniture credit deals for consumers on the basis of what the National Credit Regulator regards as irregular affordability assessments.

The National Consumer Tribunal’s judgement arose from the regulator’s investigation into the lending practices of Shoprite’s OK Furniture division‚ which kicked off with investigators visiting Shoprite’s head office in 2015‚ where they asked to see a random selection of House & Home credit agreements signed between 2013 and 2015.

They also asked to see evidence of the credit bureau checks done by the company on the consumers applying to buy furniture on credit‚ along with documentation which they had presented in order to prove they could afford to repay the loan‚ as required by the National Credit Act‚ such as proof of income.

“We found some very unacceptable things‚” said the NCR’s senior legal adviser‚ Nthupang Magolego.

“They assumed in some cases that if a women was married‚ her spouse’s income would contribute to repaying the loan‚ without checking whether he was employed‚ and in one case‚ the company noted that a consumer would be able to afford the repayment three months later when her credit card was paid off‚ without considering how she’d cope for those first three months.

“Even worse‚ one applicant was deemed to be able to afford the repayment by drawing on his bond‚ which goes against the basic concept of affordability‚” Magolego said.

“Affordability should be assessed on income‚ not access to credit.”

The consumers themselves were not contacted by the NCR investigators‚ and their agreements were analysed regardless of whether or not they had defaulted‚ Magolego said.

“The NCR believes that this judgment by the tribunal reaffirms the undesirability of reckless lending in our society‚” said the NCR’s chief executive‚ Nomsa Motshegare.

In response‚ the Shoprite Group said that it acknowledged that the National Consumer Tribunal found that one of its subsidiaries extended credit to some of its customers to buy goods from its OK Furniture stores "too easily".

"This matter relates to credit agreements concluded in June 2013 and June 2014 with nine consumers from amongst thousands. In all these cases the credit extended was settled in full by the customers concerned‚” said Shoprite.

“The National Credit Act is a complex piece of legislation‚ as acknowledged by the tribunal. The credit granting offices adhere to strict measures and are satisfied that the current process serves the best interests of its customers and is in compliance with legislation."