By Mbali Sibiya
The National Credit Regulator (NCR) has referred fashion retailer TFG to the National Consumer Tribunal for charging consumers a club fee on credit agreements.
The NCR announced on Tuesday that following its investigation, the charging of club fees on credit agreements by TFG is not permitted by National Credit Act. TFG is the operator of fashion brands including Foschini, Markham, Exact, Donna and others.
Club fees are typically charged to consumers’ store accounts at a monthly fixed rate for purported benefits including funeral plans, rewards vouchers, magazines and discount offers.
TFG said its club products are optional magazine subscriptions with insurance and other benefits. “These subscriptions can be cancelled by customers at any time, without penalty,” it said.
In the space of three months, the credit watchdog also referred TFG’s competitors Edcon and Mr Price to the Tribunal over club fees on credit agreements.
“The National Credit Act allows consumers to be given a quotation, which sets out the cost of credit before signing credit agreements. Consumers should request this quotation from their credit providers so that they can properly check the cost of credit that is being offered,” said Jacqueline Peters, the NCR’s manager of investigations and enforcement in a statement.
The act, which has been in force for the last ten years, prohibits the charging of any other fees or costs in credit agreements under sections 90, 100, 101 and 102.
However, TFG will be opposing its referral to the Tribunal, as it doesn’t agree with the view held by the regulator.
“TFG is of the view that its referral is incorrect, as the National Credit Act does not limit which products retailers may sell to its customers on their credit accounts,” it said.
The retailer would likely use the Tribunal’s judgement in June – which gave furniture retailer Lewis Stores the green light to charge club fees and extended warranties – to bolster its argument against the referral.
In the case of Lewis, two of the three Tribunal members ruled that because club membership fees and fees relating to extended warranties were reflected by Lewis separately in the account statement of consumers instead of it being included in the credit agreement, the retailer didn’t contravene the NCA.
If found to be guilty of charging club fees, TFG could be asked to refund the affected consumers the club fees charged. The NCR has asked the tribunal to order TFG to conduct an independent audit into its loan book to determine the number of consumers to be refunded.
It also wants the tribunal to interdict TFG from charging consumers a club fee on credit agreements and impose an appropriate administrative fine on the retailer.