If you’re a glass-half-empty kind of person, there are many reasons to feel despondent about 2019. It’s been a taxing year, marked by loss, bad news, environmental and rights abuses, the death of privacy and not enough victories for the ordinary person.
In South Africa, Stage 6 blackouts encapsulated the fiasco that has befallen Eskom, the importance of maintenance, and how deeply the state capture rot had set in; the drought is pushing farmers to the brink of desperation; more people are unemployed and in debt than before while out-of-touch political twits are posting self-serving selfies on wine farms; and those who are legally required to protect us, the regulators, seem to have abandoned us.
But there have also been highlights. My list of the top consumer stories: It’s the good with the bad.
Debt collection ruling/ statutory in duplum judgment
On December 13, the Western Cape High Court ruled in favour of the Stellenbosch University Law Clinic, Summit Financial Partners and their clients in a case against predatory debt recovery methods.
The Law Clinic and Summit Financial Partners brought the matter against 49 respondents, including Bayport Financial Services, the National Credit Regulator (NCR), collections attorneys, the banking sector and short-term credit providers.
For years, the collections industry has plunged consumers into a debt spiral, compounded by crippling lawyer’s fees and other charges.
It has created a toxic credit market where consumers, for example, would be granted loans of R10000, repay more than double that amount - and yet the creditor alleges they still owed more than R30000 due to interest, lawyer’s fees and other escalations.
In his ruling, Acting Judge Bryan Hack said: “Credit providers have no incentive to look after consumers or not to exploit consumers because they can utilise their resources to pursue consumers who default with a degree of impunity - knowing that they will ultimately, even if it takes considerable time, recover all that is owed to them, including their own very substantial legal costs incurred.”
Judge Hack said the NCA’s purpose was to promote responsible credit granting and credit providers were trying to shield themselves from the responsibility imposed by the act.
The judge said inasmuch as credit providers had rights, those shouldn’t trump consumer rights because the former weren’t “even paying lip service to the need for fairness and equity”.
The judgment places a greater burden on credit providers to conduct strict affordability assessments - as they are legally required - because the collection costs will no longer be as lucrative.
The judge issued a costs order against many of the respondents, including Bayport and the Legal Practice Council, and ordered a recalculation (and reimbursement) of the emolument attachment (or garnishee) orders against the Summit clients.
Chief executive of Summit Financial Partners Clark Gardner says unscrupulous lawyers enriched themselves off the NCA’s murkiness.
“The legal fraternity has milked consumers for far too long. Instead of charging the credit provider for their services, or going to the Small Claims Court, they’ve added to consumers’ woes. It’s a shocking indictment of the NCR that Summit and the Stellenbosch University Law Clinic had to step in.”
‘Debt relief’ act: plastering over the cracks
The National Credit Amendment Act, also known as the debt relief bill, which was signed into law in August, promises to give overindebted consumers respite, but it’s come under criticism for offering a dangerous and temporary fix to debt problems.
The purpose was to give consumers who earn less than R7500 a month, with an accumulated debt burden of less than R50000, access to debt intervention. Labelled “sequestration for the working class”, the act allows indebted consumers, who wouldn’t qualify for debt counselling, to apply to the NCR to be declared overindebted.
The regulator then assesses whether the debt can rearranged over a longer repayment period. If the debtor has no income, the NCR will recommend to the tribunal that the debts be suspended for up to two years. If there’s no improvement, the regulator can apply for the debt to be written off.
About nine million consumers could qualify for debt intervention, which amounts to up to R20 billion debt expunged, but that’s a worse-case scenario and improbable. Not everyone will apply; prominent lenders in the short-term market, such as Capitec, have reduced their exposure to this market; the NCR is overwhelmed and falling far short on its mandate; applicants won’t be able to take on any credit; it’s far from a quick-fix to the country’s crippling debt problems and it won’t address a dire lack of financial literacy.
Data must fall or else
Last month, the Competition Commission released its data market inquiry report, which said the high rates for cellphone data were unjustified - and prices must drop.
The report was hailed as pro-poor and a victory for consumers, but lambasted by industry insiders, who say the government has dragged its heels on spectrum allocation.
With cellular networks given just two months to slash prices by up to half - or face prosecution - next year is certain to be lucrative for their lawyers, as they will probably head to court.
The commission called the market “highly concentrated”. It singled out Vodacom and MTN as controlling monopolies, which enabled them to charge exorbitant prices - even compared with markets elsewhere on the continent where they operated - and stifle competition.
It said pricing on prepaid bundles was more expensive than on contracts, reflecting an industry bias against the poor. It wants networks to offer free data and for them to be forced to share infrastructure, to drive down costs and open the sector to emerging players.
The commission says data prices are excessive, and while prices have come down, it wants Vodacom and MTN to commit to further reductions.
Industry analyst Steven Ambrose of Strategy Worx accused the commission of overreach, saying it didn’t find
collusion, ignored network input costs, which are enormous and based in foreign currency, and failed to blame the government for dragging its heels on spectrum allocation so the operators, who rely on multiple spectrums, have had to make do.
“If spectrum was made available, the costs of data would drop by half,” Ambrose said.
National Consumer Commission goes soft on Ford
The National Consumer Commission announced last month that Ford would be fined R35 million and consumers would have the option of taking a settlement payout, entering into mediation or taking the matter to court. It said the company contravened the Consumer Protection Act, but that it was not negligent.
The commission had launched an investigation into Ford’s conduct in 2017, after being alarmed by the number of complaints about burning Kugas. It received 160 complaints from consumers, whose cars had burst into flame. The first reports of cars burning started coming at the end of 2016.
Acting NCC commissioner Thezi Mabuza said: “Our investigation into these allegations confirmed that Ford had engaged in prohibited conduct by distributing Ford Kuga vehicles that failed/could have failed as a result of a cooling system failure.”
Ford got off with a slap on the wrist: It has bragged about its high turnover, being 1% of SA’s GDP. Clients get nothing out of the settlement - and many of them would have lost out on resale value. Those whose cars were destroyed would have received insurance payouts, but more than 10000 consumers would get nothing.
The NCC diverged from its recall guidelines, that a defective product must be recalled and destroyed, while the consumer is refunded - not be forced to accept a repair.