Illustration: Colin Daniel

Shoprite account-holders should keep paying their credit life insurance premiums and repaying their loans while the National Consumer Tribunal considers the merits of the case against the retailer, says Jacqueline Boucher, the acting manager of investigations and enforcement at the National Credit Regulator (NCR).

Earlier this month, the NCR referred the outcome of its investigation into reckless lending and mis-sold credit life insurance at Shoprite to the tribunal. It is one of two major retailers the NCR has referred to the tribunal in the past few months.

The Lewis Group, the other retailer referred, said this week it would refund R44.1 million plus R23 million in interest to customers who, it said, were mistakenly sold retrenchment cover between 2007 and 2015.

However, regarding Shoprite, until the tribunal makes any kind of order, Boucher advises Shoprite consumers to continue paying their premiums and repaying their loans.

Stephen Logan, the founder of Fair Credit, believes affected consumers “should act, and not wait for the outcome of these matters”.

Boucher says the matter is at the pleadings stage, with both parties setting out their cases. Once the tribunal has heard both sides, it will set a trial date if it decides there is merit to the matter. “We have taken legal steps following our investigation, as it is our opinion that the credit insurance sold to consumers contravenes the National Credit Act … Shoprite structured a product to sell to consumers who could not claim,” she says.

An example is selling retrenchment cover to pensioners.

The number of affected consumers, and the terms of the loans and the cover, can be determined only once there has been an audit. The NCR has asked the tribunal to order an audit, which would go back a few years, Boucher says.

Even if Shoprite did refund the affected consumers along the lines of the Lewis Group, it would not relieve non-affected consumers of their obligation to pay their credit insurance premiums. And it would not relieve any of the consumers of the duty to repay their loans.

The case against Lewis, the furniture retailer, is still in the pleadings stage at the tribunal, despite the refunding decision announced this week, because of other charges that the NCR believes contravene the National Credit Act.

The matter was referred by the NCR following an investigation into mis-sold consumer credit.

Of Shoprite, Boucher says: “Once the tribunal makes a ruling – and if it rules in our favour – there will be an audit. The regulator will then ensure that every affected consumer is repaid their premiums; they need not worry. The consumer will not have to do anything.”

Predatory practices

Logan’s Fair Credit is a non-profit company that helps government and industry regulators to curb predatory consumer credit practices

Logan says: “Until the tribunal rules that the credit providers concerned (Shoprite Investments and Shoprite Insurance Company) are in breach of the National Credit Act, the companies will be within their right to try to enforce the insurance policies, even if the affected consumers believe they were mis-sold credit life insurance.

“That is not to say, however, that affected consumers should not read the policy document and decide for themselves whether or not they have been mis-sold credit life insurance,” Logan says.

Where, for example, the policy states that credit life insurance excludes self-employed individuals or pensioners, clearly, if you are self-employed or a pensioner, the policy would not benefit you. In this case, Logan says, you should write to the credit provider and ask it to cancel the credit life insurance and refund any premiums paid, because the policy was mis-sold and is inappropriate for you in terms of the Treating Customers Fairly requirements and the provisions of the Act.

If the credit provider continues to enforce the policy and refuses to cancel it, you should approach both the Financial Services Board and the NCR to apply for the matter to be investigated.

Even if you are not affected by the outcome of the Shoprite matter, you are within your rights to shop around for cheaper credit life cover and advise your credit provider that you want to switch to the cheaper insurance.

In the Lewis Group matter, it has been reported that Summit Financial Wellbeing, a company that advises on debt relief, is finalising a High Court case against the group challenging other customer charges, namely, alleged compulsory delivery fees and extended warranties.

NCR referrals

This year alone, the NCR has referred several companies to the tribunal in five separate cases.

In January, it referred a case against uBank to the tribunal after an investigation found uBank had:

* Granted credit recklessly to consumers;

* Granted credit to consumers who were in arrears on credit agreements with other credit providers and, accordingly, failed to take consumers’ debt repayment history into account;

* Included initiation fees in the principal debt of unsecured loans; and

* Incorrectly disclosed the interest rate on credit agreements.

In June, after an investigation, the NCR referred Finbond Mutual Bank to the tribunal for charging consumers excessive and unreasonable credit life insurance.

In July, it referred Lewis Stores and Monarch Insurance Company to the tribunal following an investigation that found the groups had sold retrenchment cover to pensioners and self-employed consumers.

In August, it referred JDG Trading and JDG Micro Life, two companies in the Joshua Doore Group, to the tribunal following an investigation that found the two had sold retrenchment and occupational disability cover to pensioners and consumers receiving social grants, such as old-age and disability grants, and had charged most of these consumers a fee after automatically signing them up to a club.

The NCR’s investigation also found that some consumers receiving disability grants were sold occupational disability cover, even though they had been certified as permanently disabled.

This month, it referred Shoprite Investments and Shoprite Insurance Company to the tribunal.

Shoprite had not responded to requests for comment by the time of publication.

IT WAS ALL A MISTAKE, SAYS LEWIS GROUP CHIEF

The Lewis Group is refunding R67.1-million to affected credit insurance policyholders, following “an extensive internal investigation by Lewis, which was triggered by the NCR bringing to the company's attention three instances of loss-of-employment insurance mistakenly sold to customers”, chief executive Johan Enslin says.

As a result of “human error at our stores, loss-of-employment insurance products were sold to pensioners and self-employed customers, contrary to our company policy”, Enslin says.

“Although our IT systems included coded controls, which excluded loss of-employment cover from being selected as an option for certain categories of customers, our investigation revealed that mistakes occurred during the process of entering clients’ details into the system,” he says.

“These cases of erroneous selling of insurance go back as far as 2007.

“Management will not be taking disciplinary action as we believe this was a result of human error and have rather chosen to focus on corrective action to prevent this happening in future. These steps include improving IT systems, implementing further controls and oversight by management at store, staff training and monitoring at branches.”

He also says the company has taken several preventative measures to ensure “this type of human error does not happen again”.

“The number of customers [who will be refunded] is not disclosed, but the refund relates to less than one percent of all insurance premiums earned by Lewis Group over this eight-year period since 2007,” Enslin says.

“Approximately 30 percent of the affected customers are existing Lewis customers, and the refunds have already been credited to their accounts. Lewis is currently contacting the affected people who have settled their accounts, to arrange for the refunds.”