Johannesburg - Edcon Holdings, the clothing retailer controlled by US private-equity firm Bain Capital Partners LLC, faces a fine and other penalties after a South African regulator found it had breached the National Credit Act.
Edcon, which operates outlets such as Jet and Edgars, has been wrongly charging consumers a fee for clubs linked to store cards that shoppers use at its franchises, the National Credit Regulator said in an e-mailed statement.
The regulator has referred Edcon to the National Consumer Tribunal and recommended that the retailer pay a fine, refund affected shoppers and discontinue the practice, the NCR said.
Losses at Edcon, bought by Bain in 2007, widened to R828m ($60m) in its first quarter ended June from R499m rand a year earlier. The retailer, burdened with more than R20bn in debt, appointed Bernard Brookes to replace Chief Executive Officer Jurgen Schreiber at the end of September.
Edcon is the second retailer to be referred to the tribunal in less than a month, with the NCR recommending on October 14 that Shoprite Holdings Ltd, South Africa’s largest food retailer and an operator of furniture stores, be fined for reckless lending.
“Our legal team is studying the notice of motion and the supplementary documents to better understand the regulator’s position,” Debbie Millar, a spokesperson for Edcon, said in an e-mailed response to questions, adding that Edcon will issue further statements on the matter in time.
Club membership is an optional product, according to Edcon. Prospective and existing credit customers can sign up and it entitles them to benefits including discounted movie tickets, legal assistance and educational benefits, the retailer said.