Shoprite fined R1m for reckless lending

By Edward West for IOL

Shoprite on Monday confirmed it had accepted the judgment by the National Credit Regulator and had processed the payment of the R1-million fine imposed on one of its subsidiaries, Shoprite Investments Limited, for extending credit to some of its customers too easily.

This was after the court in December upheld a National Credit Tribunal (NCT) ruling that the supermarket chain had granted credit recklessly. The High Court in Pretoria had dismissed Shoprite’s appeal, with costs.

“This matter relates to credit agreements concluded in June 2013 and June 2014 with nine consumers from among thousands. In all these cases the credit extended was settled in full by the customers concerned,” the group said.

The NCT said in a statement that Shoprite had, in these cases, disregarded consumers’ pre-existing credit payment obligations, contrary to the provisions of the National Credit Act.

Shoprite had “adjusted” credit bureau information, to enable credit to be granted where the information in the credit bureau report indicated that consumers could not afford the proposed new debt.

Shoprite also disregarded or adjusted consumers’ pre-existing and future financial commitments in order to create affordability for the proposed new debt.

In dismissing Shoprite’s appeal, the High Court noted that the “most astonishing” aspect of Shoprite’s approach to affordability assessments was the fact that many consumers “still had negative affordability figures”, even after Shoprite had carried out its “adjustments” to affordability calculations, yet Shoprite nevertheless proceeded to grant credit to these consumers.

The High Court also noted that the consumers affected by Shoprite’s conduct were mostly pensioners and individuals with low average income.

The National Credit Regulator (NCR) initially found that Shoprite was likely grading credit recklessly to some consumers during a research exercise In September 2014, said NCR CEO Nomsa Motshegare.

The NCR then initiated an investigation into Shoprite’s affordability assessment and credit-granting practices.

In September 2017, the NCT, following a referral from the NCR, ruled that Shoprite had on a number of occasions, failed to conduct proper affordability assessments prior to granting credit to consumers, and thus had granted credit recklessly. It further ordered Shoprite to pay a R1 million fine.

In December 2019, a full bench of three judges unanimously dismissed Shoprite’s appeal against the NCT ruling, with costs.

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