Capitec Bank – recently crowned the best bank in the world and one of South Africa’s biggest banks is facing two reckless lending court cases. which could have an impact on its lending practices.
Consumer watchdog Summit Financial Partners served papers on the bank last week. The High Court application requested the bank to provide consumer credit agreements based on the clients providing summit permission to access the documents. In the second court case Summit is taking on Capitec over its multi loan practices, which it claims amounts to reckless lending.
Summit CEO Clark Gardner said that Capitec might be the best bank in the world for shareholders, but certainly not for consumers. Gardner is questioning Capitec’s high yields. He said such yields are earned by not applying some of the consumer protection laws in the National Credit Act, especially to reckless lending and initiation fees.
In the case before the Stellenbosch Magistrate’s Court, Summit alleges that Capitec’s multi loan product is deceptive in that it looks and acts like a facility or overdraft, but is charged like a payday or short term loan. The consumer may access the amounts each month without a new agreement or affordability assessment, but pays the 12% upfront flat fee each time they withdraw the amounts from an ATM. Summit also charges that the Capitec loans contravene the National Credit Act in that the bank does not do the proper assessments before the multi loans are granted.
Capitec Hits Back At “Reckless Lending Charges”
Capitec has rejected the claims that they have exploited their clients through a one month loan facility, following accusations that it has contravened the National Credit Act.
Summit financial partners is suing Capitec for allegedly breaking the county’s credit laws by offering short term unsecured loans in a manner that amounts to “reckless lending”
Capitec has defended the loan in the question nothing that it was a one month loan similar to what other banks provide and is structured to enable easier access for clients. The executive for marketing and corporate affairs Carl Fischer said that the court were brought due to this fundamental misunderstanding of how the product worked. It was discontinued and replaced with a credit facility in 2015.
Carl Fischer stated, “The dispute is of a technical nature and the process of credit assessment and pricing are in accordance with the requirements of the National Credit Act. We strongly disagree with the allegations made regarding its legality.
“We believe statements and allegations have been made that are not correct, due to a technical misunderstanding of the product. The loan in question is a one-month loan, which most credit providers offer. Some other banks also offer this type of product.
“The application process (which is being disputed) was adjusted to enable more convenient, easier access for clients. Once a client has physically applied in branch, the first time, the process enables the client to take another one-month loan, remotely in a following month.
“A credit assessment is redone for every loan application. The price charged for the loan is well within the pricing defined by the National Credit Act (NCA), and the loan is in accordance with the legal requirements of the NCA.
“Clients are in no way exploited, and default rates on this loan are no higher than on 12 or 24 month loans.
“We will be replying to all specific allegations made by SummitFin in court papers and before the court.”
According to Likemoney the Capitec Savings Account is ranked as the most liked savings account product amongst its users.