17 Dec 2014

NCR Calls For Cash Converters To Be Fined

National Credit Act (NCA), National Credit Regulator (NCR) No Comments

The National Credit Regulator (NCR) is calling for a fine to be imposed on the national second-hand retail chain Cash Converters for various breaches of the National Credit Act (NCA).

In addition to buying and selling second-hand goods, Cash Converters operates as a pawnbroker and credit provider, offering mainly pay-day loans and what it calls a “cash advance” loan, which is a loan against your valuables. (A pay-day loan is a small unsecured loan, which attracts the highest interest rate allowed by the NCA – five percent a month – and is typically rolled over several times. In other words, as soon as you pay it off, you are offered another loan.)

Lesiba Mashapa, the company secretary at the NCR, says the regulator has referred to the National Consumer Tribunal a case against Cash Converters for failing to undertake proper affordability assessments in the granting of pay-day loans and for unlawful clauses in its contracts.

Mashapa says 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 says. Say, for example, you borrow R1 000 and you pawn your diamond ring worth R5 000. If Cash Converters lose the ring, you are compensated R1 000 and not R5 000, the fair market value of the ring.

In addition to seeking a fine, the NCR 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.

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