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Cape Town - Lewis Group [JSE:LEW] was the biggest loser among its peers on Thursday, with shares down 3% after subsidiary Lewis Stores was found to be in breach of the National Credit Act (NCA).
At midday, Lewis' share price tumbled -3.03% to R41.22, making it the worst performer among its sector peers on the JSE.
The National Consumer Tribunal (NCT,) in its first substantial ruling against a listed company, ordered Lewis Stores to refund clients for premiums on certain credit agreements it entered into since 2007.
The agreements relate to credit insurance and disability cover sold to pensioners and self-employed consumers.
READ: Lewis faces fine for breaching National Credit Act
"This is justice to the thousands of pensioners and self employed clients that ended up paying significant sums for insurance they cannot benefit from," said Summit Financial Partners CEO Clark Gardner.
Gardner was the person who originally lodged a complaint with the National Credit Regulator (NCR) in January 2015 to expose Lewis’ alleged dubious credit practices.
"How can a furniture retailer have R5.8b in revenue when a mere R2.6b was from merchandise sales? Where does the rest come from? Well, among others, it is from the sale of loss of employment insurance to every client that purchases on credit and this practice has now stopped," he claimed.
Lewis said in statement on Thursday that it is considering the findings.
"Lewis will be considering the judgment with its legal advisers for purposes of determining the next steps to be taken by it in this matter, and shareholders will be kept advised on developments."
Although Lewis Stores conducted an internal investigation last year into employment insurance sold to customers, the NCT wants an independent audit.
READ: Consumer watchdog takes Lewis on over charges
The NCT ordered that an independent audit be conducted at Lewis’ expense within 120 days, adding that all affected consumers identified in the audit, be reimbursed the premiums paid for the insurance.
While details of the audit remain unclear, Gardner said it could potentially be "incredibly powerful" to identify other breaches.
"These would include the compulsory nature of the delivery fees charged, the extended warranty policies that have overlapping dates with product warranties and alleged reckless lending practices," he explained.
"Lewis relies on these ancillary fees, which they refer to as ‘profit makers’, to generate their profits that should instead be focused on pure merchandising and lending practices," claimed Gardner.
The audit report must be furnished to the NCR within 150 days and thereafter a fine will be determined. Gardner said Summit hopes the full requested fine of R10m is levied.
Following its own probe in October Lewis Stores refunded 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.
Lewis said to date it has reimbursed the premiums paid together with interest to more than 90% of such consumers.
Although Lewis refused to tell Fin24 the total number of clients refunded, industry sources believe the affected group is about 1 million.
"Lewis has only disclosed the total amount of the premiums and interest reimbursed and has not disclosed the number of clients," Lewis management told Fin24.
Gardner said Summit will push the ruling further to hold Lewis' directors personally responsible for "such unscrupulous behaviour in ripping off the consumer".
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