Johannesburg - African Bank Investments Limited (Abil) has paid R20 million to the National Credit Regulator (NCR) to settle allegations of reckless lending that were made by the regulator against the microlender earlier this year. The settlement, which is not a fine, does not involve any admission of guilt or wrongdoing by Abil.
In February, the NCR advised Abil that it had referred two cases of reckless lending by Abil to the National Consumer Tribunal and that it had proposed that the tribunal impose a fine of R300m on Abil.
Following the R20m settlement, the matters have been withdrawn from the tribunal with immediate effect.
“The NCR and African Bank have, through a process of mutual co-operation, resolved the matters to the mutual satisfaction of both parties,” Abil said in a Stock Exchange News Service statement yesterday.
The statement said that Abil endorsed and supported “the processes initiated by the NCR and all other regulators, and will continue to participate and play an active role to ensure that the credit industry further develops in a responsible and effective manner.”
The Abil share price gained 5.4 percent to close at R19.40 yesterday following the announcement of the settlement. The share price was trading at just over R30 in February when the NCR informed Abil of the referral to the tribunal.
The action by the regulator and the general increase in scrutiny of unsecured lending by the government are just part of the difficulties facing Abil this year.
A significant increase in bad debts and a slump in lending activity have combined to undermine the group’s performance, with management warning shareholders recently that earnings for the year to September would decrease by between 58 percent and 63 percent.
Analysts said yesterday that the announcement of the settlement provided some welcome relief for Abil.
However the settlement, the terms of which indicate there may have been little substance to the NCR’s allegations, does raise issues around the appropriateness of the regulator’s decision to refer the matter to the tribunal.
At the time that the NCR’s allegations were made public, Abil explained that the alleged reckless lending related to manipulation of the lender’s affordability calculations and affected 397 customers and loans with a capital value of R15.5m.
“After a thorough internal investigation, three [Abil] agents were dismissed for fraud. It was found that in the majority of instances, customers colluded with these agents and made illicit payments to the agents in return for granting the loans,” Abil said earlier this year.
It noted that it granted about 4.7 million loans in the period that the fraudulent loans were granted and that the loans constituted 0.01 percent of the total loans granted by the bank during the period. - Business Report