African Bank faces rap over its lending

African Bank is being dragged to the National Consumer Tribunal for allegedly lending recklessly and contributing to consumer over-indebtedness.

The National Credit Regulator (NCR), which lodged the complaint on Friday, said the country's largest provider of unsecured loans should be fined about R308-million.

The regulator, headed by Nomsa Motshegare, asked for the suspension of African Bank's Dundee branch in KwaZulu-Natal as it was responsible for most of the reckless loans. It should also not offer or conclude any credit agreements for 12 months.

The NCR filed two cases after an investigation prompted by consumer complaints and said African Bank granted loans to at least 700 consumers who could not "cover the loan instalment amounts".

It asked the tribunal to order African Bank to write off the reckless loans or restructure them. It also wants the tribunal to force the lender to clear, at its own cost, the adverse credit bureau listings of the affected consumers with credit bureaus and to rescind any judgments obtained against these consumers in relation to the reckless loans.

African Bank, which has been tightening its lending criteria, said the proposed fine was "unwarranted". The Leon Kirkinis-led lender fired back at the NCR by setting its attorneys on the regulator

"It is important to note that African Bank has been subjected to numerous reviews by the NCR over the years and has never been accused by the NCR of being reckless," it said.

The group's share price fell more than 6% on the news, but recovered and closed at R30.50.

Kirkinis said he was surprised by the allegations and was not expecting the matter to go the tribunal. African Bank said the fraudulent activity related to manipulation of African Bank's affordability calculations and affected 397 customers and loans totalling about R15.5-million.

The bank claimed that after an internal investigation in 2011, three employees were dismissed for fraud. It was found that, in most instances, customers colluded with these agents and made illicit payments to bank employees to get the loans.

The bank also said it continuously monitored compliance with internal policies and the National Credit Act.

African Bank granted about 4680000 loans in the period when the fraudulent loans were granted. The fraudulent loans came to 0.01% of the total. The bank wrote off and rescheduled the affected loans and corrected the customers' profiles.

Motshegare would not discuss African Bank's response.