Before the National Credit Act came into force five years ago, credit providers – the banks and the retail stores – had the right to increase the credit limit on your account whenever they wanted to, without even informing you.
Clearly, that encourages people to spend more – in some cases more than they can comfortably afford to pay back.
So, to curb irresponsible lending – and thus irresponsible spending on the part of account holders – the act prohibits credit providers from increasing their account holders’ credit limits without their consent.
There are, however, a couple of “buts”.
If you consent to an automatic annual credit limit increase, the credit provider may do this, and they may also “temporarily” increase someone’s limit on a particular day if a credit-worthy customer chooses to do so.
Two Edgars account holders recently complained to me that their credit limits had been increased without their consent when they made purchases at different KwaZulu-Natal stores.
Both complained to the company’s customer care division, and both claim to have been told that because cashiers are given incentives to increase account holders’ credit limits, some activate an increase automatically.
One of the complainants was Merryl Fairfoot of Durban, who opened her Edgars account about 30 years ago.
She said that while buying items at Edgars’s Pavilion branch in December, she was asked by the teller if she’d like to increase her credit limit.
“I said ‘no’, and then she asked me to sign a piece of paper to prove that she’d offered it to me,” Fairfoot says. She did so without reading it properly.
In January, she discovered her limit had been increased.
Responding a few weeks ago, Edcon’s executive manager of group services, Deven Naicker, said Edcon store staff were “incentivised” to offer a credit-limit increase to customers who qualified for them.
“However, we have strict policies and procedures with which staff members need to comply,” he said.
“They are required to obtain a customer’s signature on the acceptance by the customer for such a credit-limit increase offer, and a record is kept of it.”
As for the suggestion that customers unwittingly agreed to credit increases by putting their signatures to consent documents during the payment process, Naicker said it was incumbent on them to find out what they were signing for.
Fairfoot’s credit limit increase in January was not the result of her agreeing to it at the till point, but rather her consent to an annual increase when she opened the account, and the fact that she has a good credit history, Naicker said.
He denied that credit limits were automatically processed.
The story had rather a disturbing sequel.
The weekend before last, Fairfoot returned to Edgars in the Pavilion, and took her chosen purchases to the till.
“The cashier asked me if I would sign a slip of paper confirming I do not want an increase, to prove that I had been offered the increase and declined – virtually word for word what the other cashier told me back in December.
“He was very insistent that I sign but I refused. Finally, he wrote declined across the slip and put it to one side. I asked him for a copy of the document and that’s when I discovered that I was actually being asked to sign my consent to a credit limit increase.
“And I noted on my till slip that I had been granted the increase despite not signing it.”
On March 5, she returned to Edgars to pay her account.
That time there was no mention of her credit limit but she noted that it had gone up anyway – to more than R10 000.
Naicker conceded that Fairfoot’s credit limit had gone up again this month, despite her declining the offer.
“We have since reduced the credit limit to the previous value and the necessary internal disciplinary actions are being conducted to prevent a future occurrence,” he said.
He said store staff are no longer incentivised on credit limit increases – clearly that’s a good move.
As for the R10 000 limit Fairfoot had seen on her slip last Monday, Naicker said that was a “one-off” temporary limit available only on that day should she wish to take advantage of it, in terms of the National Credit Act.
“We regret any possible inconvenience this might have caused Mrs Fairfoot and we advise that the credit limit has been reduced to its previous value.”
Fairfoot is not satisfied with that response.
“Two cashiers both misleading me as to what form they wanted me to sign, within a space of three months, either points to deliberate manipulation of credit increases or exceptionally poor levels of staff training, which clearly have not been addressed by Edgars Pavilion since I first reported this in January,” she said.
“And should I not be consulted on having my credit limit increased, even if it is for one day only?”
Fairfoot has decided to pay off her Edgars account next month and then close it.
WHAT TO DO:
l Given the relatively high interest you pay on store card balances, it’s a good idea to keep your limit as low as possible.
l Check your credit limit on your statement every month and instruct the company to lower it if you are not happy.
l If you do not want the company to have the right to increase your limit unilaterally, find out if you gave them this right when you opened the account and, if so, reverse it.
l If you are offered a credit limit by a teller when you’re making a purchase, and you decline, make sure that whatever you put your signature to reflects this and ask to be given a copy of it.