SA credit regulator targets Cash Converters

South Africa’s National Credit Regulator (NCR) recently called for a fine to be imposed on second-hand retail chain Cash Converters, charging various breaches of that country’s National Credit Act (NCA). In addition to buying and selling second-hand goods, Cash Converters operates as a pawnbroker and credit provider, offering mainly payday loans and what it calls a “cash advance” loan, which is a loan against your valuables. A payday loan, more typically offered by micro-lenders, is a small unsecured loan, which attracts the highest interest rate allowed by the NCA – 5% a month – and is typically rolled over several times. In other words, as soon as you pay it off, you are offered another loan. A pawnbroker, on the other hand, offers loans that are secured by items of personal property owned by the client. Lesiba Mashapa, the company secretary at the NCR, said the regulator had referred to the National Consumer Tribunal a case against Cash Converters for failing to undertake proper affordability assessments in the granting of payday loans and for unlawful clauses in its contracts. Mashapa said that, in terms of Cash Converters’ contracts, consumers are required to insure their pawned goods. However, the NCA stipulates that a pawnbroker must retain pawned goods at its own risk. “By requiring consumers to ensure the property, they were passing the risk to consumers,” Mashapa says. The contracts also state that consumers will be compensated only for the loan amount, instead of the fair market value of the pawned goods, if Cash Converters lose or damage the goods, he said. For example, consider someone borrowing R1 000 and who then pawn their diamond ring worth R5 000. If Cash Converters lose the ring, the borrower is compensated R1 000 and not R5 000, the fair market value of the ring. In addition to seeking a fine, the regulator wants the tribunal to prohibit Cash Converters from using contracts that contain unlawful provisions and to order the company to refund consumers who were compensated for less than the market value of the items they entrusted to Cash Converters. Cash Converters has 66 stores in South Africa, and on its website boasts over 7 000 stores in 21countries, including Namibia. The regulator’s case is against the franchisor, Cash Converters in Bekker Road, Midrand, and against franchisees in Benoni, Boksburg and Kempton Park, Mashapa said. JOHANNESBURG IOL