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Consumers take the Capitec Bank to Court

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By Bongekile Nkomo

The Summit Financial partners have laid charges against the South African Capitec Bank claiming that the bank practices amounted reckless lending and that the bank had made unjustified profits.

The Summit Financial Partners help low-income consumers with financial advice. The company has also recently taken the furnisher store, Lewis to court for abusing the National Credit Act.

The Summit Financial claims that Capitec uses its multi loan credit products as a series of short term pay day loans. Meaning that consumers are overcharged according to their report, Capitec charges fees for each time customers renew their loans and evidence found that customers did not reapply for loans.

“Capitec bank remains committed to operate and keep operating”, Said the Capitec Spokesperson Charl Nel.

According to Capitec’s annual report, lending in the bank’s higher-margin short-term loan book during the financial year to February, resulted in a 75% surge in rescheduled loans worth R1.5bn.

The institution said at the time that this reflected economic challenges faced by clients, but Summit now claims consumers use large portions of their salaries to settle multi loans, leaving them with too little to survive on unless they “top up” with another loan.Loans taken out on the 18th of the month have to be repaid by the 25th, together with an initiation fee of about 12%.

Calculated over the seven-day loan period, the fee would translate to 1.7% per day, or 625% per year, it said. This was before interest and monthly service fees were added.

“The … fees are charged in return for costs associated with affordability assessments, pre-agreement quotes and credit agreements,” said Summit CEO Clark Gardner.

“However, none of these activities actually take place after the first advance on their multiloan product.

“The remaining 11 accessible advances are accessed via the ATM after a mere three questions are asked regarding the consumer’s changing circumstances,” he said.

Mr Gardner said the court bid was to get Capitec to refund consumers who had overpaid.

Summit said it had resorted to court action after reporting the issues to the National Credit Regulator (NCR) several times, without success.

Lebogang Selibi of the NCR said it was constrained from tackling Summit’s allegations before informing the Reserve Bank, as they involve a bank.

Information extracted from:  The Business Day Live

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