Pretoria - In a victory judgment for the Edcon Group, which is South Africa’s biggest clothing retailer and owns retail stores such as Edgars and Jet, it may yet again charge club fees for its willing customers.
The National Consumer Tribunal earlier found that Edcon unlawfully charged its customers club fees and was in contravention of the National Credit Act (NCA).
The tribunal directed that a hearing had to be held to decide on appropriate sanctions to be imposed against the retailer.
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Edcon turned to the North Gauteng High Court in Pretoria to appeal the finding.
Judge Johan Louw upheld the appeal, concluding the tribunal erred in finding Edcon engaged in conduct prohibited by the NCA.
He said it was not disputed that Edcon is a retailer that offered a revolving credit facility to its customers, which they access by using a “private label store card” to purchase products.
One of the products sold is known as Club, which offers customer benefits in return for the payment of the Club fee.
The amount of the fee and the benefits depend on the category of Club membership and range between R30.90 to R60 a month.
VIP members are entitled to many more benefits than a customer who purchased, for example, the Jet Club membership for R30.90.
Club membership is an optional item which customers apply for, or can decline, when they apply for credit. If a customer’s account goes into arrears of 90 days, the charging and membership of Club fees is suspended.
In December, 2015, 1 491 412 of Edcon’s accounts had the Club fee charged to them, which equated to 58.8% of its active client base.
The tribunal concluded that by adding the Club fee to the credit agreement of a customer, Edcon had contravened the NCA.
But counsel for Edcon on appeal argued that this was a wrong conclusion and that it flowed from posing the wrong question, namely whether the NCA allows a credit agreement to “contain” any fee or charge other than which is permitted by the NCA.
It was said that the question to ask is whether Edcon’s credit agreements require the payment of Club fees. Judge Louw said if this was asked, the tribunal would have come to the correct answer.
He said Edcon’s credit agreements do not place any obligation on a customer to pay a Club fee.
If it did, it would have been against the NCA.
The Club membership can be cancelled by the customer at any time and it thus did not violate the NCA.