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Credit regulator to appeal Lewis tribunal victory over club fees

Jun 06 2017 11:07
Matthew le Cordeur

Cape Town – The National Credit Regulator (NCR) will appeal the National Consumer Tribunal’s judgment on Monday, which dismissed its referral against Lewis Stores over its club fees and extended warranties.

“The NCR does not support the credit retailers' conduct of charging consumers a club fee on credit agreements or under any supplementary agreements or documents,” the NCR said in a statement on Tuesday. “This fee increases the consumers' cost of credit.”

The referral related to Lewis stores offering consumers extended warranties that run concurrently with manufacturers’ warranties, and the charging of a club fee reflected in consumers' statements of account. The club fee is reflected in consumers' statements of account issued by Lewis Stores to its credit customers, the NCR said.

The referral to the tribunal came after Summit Financial Wellbeing conducted a mystery shopping experience at Lewis in 2015 and uncovered breaches of the National Credit Act (NCA).

Lewis Group [JSE:LEW] then decided to refund R44.1m to a group of its customers for the cost of loss of employment insurance mistakenly sold to them, together with R23m in interest accrued on this amount, Fin24 reported in 2015.

READ: NCR refers Lewis to National Consumer Tribunal

On Monday, the tribunal ruled that the NCA does not prevent credit providers from offering the services of a club to consumers, provided these services are not part of the “cost of credit”, Lewis explained in a statement on Monday. 

“It was found that the club fees charged by Lewis do not form part of the cost of credit of any credit agreement between Lewis and its customers.

“The act provides that Lewis may include the cost of an extended warranty as part of its fees and charges in its credit agreements with consumers and does not prescribe the terms and conditions of the extended warranty offered by Lewis to its customers,” Lewis said.

READ: Lewis faces fine for breaching National Credit Act

The tribunal also found that the referral is distinguishable from the Edcon referral in that the club fee formed part of the credit agreement in the Edcon referral, the NCR said on Tuesday.

“It was an integral part of the credit agreement process. In the Lewis referral, the majority judgment found that there was a separate contract for joining the club and a separate fee charged for club membership.”

“In the referral, the NCR also challenged the extended warranties offered to consumers in that they ran concurrently with manufacturers warranties,” said the NCR.

“This was because some warranty agreements had no duration dates or their duration dates were the same as those on the credit agreements. The majority judgment found that these are not a contravention of the National Credit Act.”

In a minority judgment, the tribunal found that the club fees and extended warranties offered by Lewis Stores contravened the NCA.

Lewis shares were up by 0.7% on Tuesday at 10:30, trading at R35.25.

READ THE FULL JUDGMENT:

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