Johannesburg - Lewis Group, South Africa’s troubled furniture company, says it will refund consumers a total of R69 million in both premiums and interest.
This follows an internal probe that found “human error” was one of the reasons behind the awarding of loss of employment policies to pensioners and the self-employed.
Relief rally
By Friday’s end, Lewis’ shares had climbed the highest of the JSE’s all share stocks. Lewis ended Friday up 10.32 percent at R66.18.
The movement was sparked by the news that Lewis, and Monarch Insurance, had filed an answering affidavit to a complaint by the National Consumer Tribunal that they had contravened the law by selling policies for loss of employment to pensioners and the self-employed, people who are not entitled to such policies.
Mark Hodgson, an analyst at Avior Capital Markets, said the rise of the share indicated relief among investors.
“There appears to be a relief rally in the Lewis share price following a forceful response by the company to the regulator and other criticism of its business practices – with very few concessions made,” he said.
Another analyst, who spoke on condition of anonymity, said: “Lewis seems to have come up with some very plausible arguments in response to the accusations.”
Lewis said on Friday both companies had rejected claims by the National Credit Regulator (NCR) to the tribunal that the sale of the policies was fraudulent and deceitful.
Lewis said its internal investigation had found that a small percentage of pensioners and self-employed people were sold such policies, through human error and contrary to Lewis’ own internal policies.
The retailer is still calculating the amount to be refunded to consumers.
“Although the calculation exercise has not been completed, shareholders are advised that Lewis estimates an approximate amount of R46m in premiums, and interest of R23m, will be refunded to consumers,” Lewis said.
The company also rejected the NCR’s allegations that the sale of disability insurance to pensioners and people who were self-employed constituted a contravention of the NCA.
And Lewis’ directors said they had taken exception to media reports and statements by commentators on the group’s credit business. They said its credit model was “well-suited” to its lower-to-middle-income target market where customers relied on store credit to buy products.
“The directors believe the group’s business model has a competitive advantage,” the company said.
Ellerines gone
“Other participants in the industry have separated furniture retail and financial services, and utilised centralised call centre-based methods of contact with customers. Lewis does not consider such a model appropriate or effective in addressing the needs of its target market customer.”
The company pointed out that there had been widespread closures in furniture retailers that had separated these services. It mentioned in particular the recent demise of the Ellerines Group.
Furniture retailer Ellerines went into business rescue after the implosion of its parent company African Bank.
Lewis has 444 shops in South Africa, and another 47 stores in Botswana, Lesotho, Namibia and Swaziland.
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