Publications
Partners
Cape Town – African Bank asked clients R600m too much on loans in arrears, Die Burger reported on Friday.
African Bank’s auditors brought this transgression of the National Credit Act (NCA) to the attention of the National Credit Regulator (NCR).
This is one of various transgressions which has now come to light and of which African Bank has been guilty over the past few years.
The NCR discovered this in at least five different investigations.
It points to a much larger compliance problem by the bank than had been anticipated initially.
The transgression relates to the so-called in duplum rule in terms of article 103 (5) of the act. The rule determines that the interest and other costs raised since a loan became in arrears may not be more than the capital amount on the date the client became in arrears.
Almost 164 000 clients are impacted by the transgression – roughly more than R3 600 per person.
READ MORE ABOUT THE IN DUPLUM RULE: Not winning the debt battle
Since African Bank was placed under curatorship in August more questions were raised about what the NCR and the SA Reserve Bank (Sarb) could have done to prevent the bank’s collapse and whether the auditors should perhaps have noticed the problems earlier.
Lesiba Mashapa, the company secretary of the NCR confirmed on Thursday that this transgression does not relate to the settlement reached with African Bank in 2013 regarding reckless lending. African Bank was fined R20m for this in October 2013.
Initially the NCR wanted the bank to pay a fine of R300m.
Questions in parliament
Information on the transgression of the in duplum rule came to light in an answer in a response by the minister of trade and industry to a question asked by Dean Macpherson, a DA member of parliament and a member of the portfolio committee on trade and industry.
During an information session on African Bank two weeks ago the NCR did not want to answer certain questions by Macpherson.
The department said the NCR had undertaken five investigations at African Bank. It seems the in duplum investigation was the most recent one.
It was undertaken after the auditors had brought it to the NCR’s attention in a compliance report. Once the NCR had received the report from the auditors, it contacted African Bank about it in April.
African Bank indicated that clients had paid R620m too much.
The bank apparently agreed to repay the money to clients and to undertake corrective measures regarding the consequences of its actions on clients.
It meant, for instance, that the bank had to have information it had provided credit bureaux regarding these clients removed.
“The NCR ordered African Bank to supply an audit report to confirm that these amounts had been repaid and corrective steps had been taken...the auditors are currently working on this and will then submit the report to the NCR.”
Sarb notified
Sarb has been notified of the auditors’ findings. It has not been said when this had happened.
No reference to the transgressions could be found in the recent report on African Bank’s results.
African Bank did, however, refer to the in duplum rule in its annual report of 2013 when it mentioned a change in the calculation of provision for bad debt.
In its half year results in 2013 a write-off of R140m regarding the in duplum rule was noted on credit card debt.
On Thursday African Bank’s auditors, Deloitte, did not answer the question about when this issue had been brought to the attention of the NCR.
Mike Comber, head of reputation and risk and vice chair of Deloitte Southern Africa’s council on partners and directors, raised issues regarding confidentiality.
ALSO READ: Legal costs pack huge punch
- Fin24
For business news in Afrikaans, see Die Burger and Netwerk24.
