Make sure you understand the terms of service on websites that claim to source loans from financial institutions, or you may end up paying for products or services you do not want, warns the National Consumer Commission (NCC).
The commission has launched an investigation into online companies that are allegedly not fully upfront about the services consumers are, in fact, buying. The NCC has received a number of complaints from consumers who say they were charged for services such as legal advice when they were under the impression they had applied only for a loan.
Trevor Hattingh, a spokesperson for the NCC, says the investigation is nearly finished, and the commission will decide soon whether to refer the matter to the National Consumer Tribunal for prosecution.
“The mistake that most people commit is that they don’t fully read the terms of service before they click the ‘submit’ button, as such sites keep the terms of service way below the actual ‘loan application’ form.
“We must ensure that the Consumer Protection Act is adhered to, and that any company that sells products and services to the consumer first makes the consumer aware in a frank manner of what they are actually paying for. This is what is at the heart of this matter,” Hattingh says.
Personal Finance received a complaint from a consumer who was debited for an “activation fee” of R399 on a “Convenient Service Package” she had apparently bought from an online company claiming to source loans.
Consumers are increasingly turning to online platforms for loans and other financial services, because they are convenient and require less paperwork. They also obviate the need to read pages of terms and conditions, and this is where some online platforms can take advantage of you.
I followed up on the reader’s complaint and visited the website in question to find out how the site operates and what information is made available to consumers so they can make an informed choice.
On entering the website, I saw immediately why consumers could easily be confused about what they are buying.
On the home page, the site described the “Convenient Service Package” as a telephonic assistance plan that comprises services ranging from advice about a will and personal injury assistance, to a “complimentary loan-finding service”. The site claimed to source a loan, but after reading this, I was perplexed, because the loan service is only “complimentary”.
The site then alerted me that its core business was not to provide loans, but to sell the above-mentioned services. “Please note, the Convenient Service Package fees have no association to the loan-seeking service/facility or the loan application as a whole. The loan-seeking facility is a complimentary added benefit to [the site’s] convenient service package offering.”
I decided to follow the same route the complainant took and went to the section that allows consumers to apply for a loan. This section was fairly standard for online loan and other financial services websites. It required me to enter my name, identity number, loan amount and banking details, among other things.
After I clicked the “submit” button, I immediately received an email saying: “This email confirms that you successfully purchased the ... Convenient Service Package. Thank you.”
The email asked me to provide copies of my identity document, pay slips and bank statements, failing which the company would not be able to proceed with my application.
I concluded that this was not, in fact, a loan application and ended the process. What is startling is that this did not stop the company from proceeding with my “application”, even though I had not provided the requested documents.
Come pay day, my bank account was debited for an activation fee of R399, with a balance of R948 to be paid in instalments of R90 over 11 months. I immediately reversed the debit order and instructed my bank to stop such debit orders in future.
This was the company’s response after I reversed the debit order: “Our records reflect that your account is outstanding to the sum of R1 347 as of 25/07/2017. In order to avoid being in material breach on your agreement entered into on 28/06/2017, we urge you to settle the outstanding amount as soon as possible.”
BE CAREFUL WHEN SOURCING A LOAN
YOU should be aware of the following when you are looking for a loan, says Mpho Ramapala, the education and communications manager at the National Credit Regulator (NCR):
• Do not provide your banking details when applying for a loan online, because if you click the “submit” button, you may find that you have agreed to subscribe to a telephonic service;
• Do not use websites or respond to advertisements that claim you can apply for a loan even if you have been blacklisted, or that your loan application will not be subject to a credit check;
• Walk away if you are asked to pay an upfront fee;
• Find out whether a credit provider is registered with the NCR by checking its registration number against the number on the NCR’s website (www.ncr.org.za);
• Understand exactly what you have committed to buying before you click “submit”;
• Ethical companies that source loans do not charge you for applying for a loan; and
• It is better to apply for a loan directly with a registered credit provider. If a registered provider declines your application, it will not “suddenly” approve your application simply because it was approached by a third party on your behalf.