Up Money fined R1 million and declared a pyramid scheme
FOUNDERS of Up Money have to cough-up R1 million after the National Consumer Tribunal (NCT) fined the scheme an administrative fine for conducting a pyramid scheme.
The NCT said Up Money contravened Section 43 (2) of the Consumer Protection Act (CPA). UP Money has 20 working days to pay the fine.
Up Money was referred to the tribunal following the NCT investigations into allegations that the “stockvel” was a pyramid scheme. Last year, the scheme had about 230 000 members.
Up Money had promoted its scheme as a “stockvel” to gain members. The scheme promised participants on its website that they could “turn” R20 into groceries and R500.
The scheme operated by promising a meat or grocery pack. Participants were required to pay a one-off joining fee of R180 and to recruit five new participants. Most of the recruitment was done on social media.
A stockvel is a club of 12 or more people where members contribute fixed sums of money to a central fund on a weekly, fortnightly, or monthly basis.
According to the CPA, a pyramid scheme is an arrangement, agreement, practice, or scheme if participants receive compensation derived from their respective recruitment of other persons as participants, rather than the sale of any goods or services.
Department of Trade Industry and Competition Deputy Minister Nomalungelo Gina said the department welcomed the tribunal’s decision.
“Up Money’s business model was unsustainable as it relied heavily on new participants feeding into the scheme,” said Gina.
Gina warned that South Africans should not contravene the CPA rules while trying to explore other sources of income as they will lose money in the process.
Acting National Consumer commissioner Thezi Mabuza said pyramid schemes were prohibited in South Africa.
“Pyramid schemes continue to mushroom daily, especially on social media platforms, and consumers continue to lose their hard-earned money,” she said.
She said she wanted to remind all those involved in the scheme that they broke South African law.
“We want to send a strong message to operators of schemes, arrangements, or practices like Up Money that as the consumer protector in the space, we will not tolerate the contravention of the Act,” said Mabuza.
Last year, the NCC warned consumers that if they were part of the scheme, they were at risk of being charged for joining a pyramid scheme.
BUSINESS REPORT ONLINE