National Credit Regulator loses battle against Lewis on club fees

The National Credit Regulator has lost its three-year battle against furniture group Lewis Stores on extended warranties sold by the company.

The Supreme Court of Appeal dismissed an appeal by the regulator against a decision by the high court in Pretoria in May last year.

The high court had dismissed an appeal by the regulator against a decision by the National Credit Tribunal.

In 2016, the regulator had referred Lewis to the tribunal for allegedly contravening the National Credit Act (NCA).

The regulator had conducted an investigation into two aspects of Lewis Stores business, namely the sale of extended warranties and membership of the Lewis Family Club.

It lodged a complaint with the tribunal, contending that some extended warranties were invalid because the documents containing the warranties had been incorrectly completed.

The regulator also said the warranty was for less than the full period of two years after the expiry of the supplier’s warranty.

The regulator claimed this invalidated the extended warranties and meant that Lewis Stores was charging an amount as part of the consumer’s debt that was not permitted by the NCA.

It also claimed that the club fees charged by Lewis for membership to the Lewis Family Club was an unlawful cost of credit.

In June 2017, the tribunal ruled in Lewis’s favour and found that the furniture retailer’s club fees and extended warranties did not contravene the act.

After the high court decision, the regulator approached the SCA.

In its judgment on Friday, the SCA said extended warranties were expressly permitted under the National Credit Act.

It said the evidence demonstrated that in all instances where a customer purchased an extended warranty, this was entered in the customer’s record with Lewis Stores as being for a two-year period after the expiry of the supplier’s warranty.

Accordingly, there was no breach by Lewis Stores of the provisions of the act.

Regarding membership of the Lewis Family Club, the court said the membership was entirely separate from the credit agreements concluded between Lewis Stores and its customers and it did not impose an additional cost of credit on consumers.

“The club fees are payable in advance and do not constitute credit. No interest is raised on the arrears and in the event of them not being paid they are not recovered," acting judge of appeal Johannes Eksteen said in his judgment.

He said it could not be said that a consumer was “required” to pay the club fee; nor that it increased the cost of credit; nor could it be said that the club fee, if it was paid, was paid under the credit agreement.

“The mere fact that some consumers are introduced to the notion of club membership during the credit application process can have no bearing on the interpretation of the provisions of the NCA,” Eksteen said, as he dismissed the regulator’s appeal with costs.