Edcon Win Club Fees Case Against NCR
Back in 2015, the NCR announced that they had been investigating Edcon over the topic of club fees. Then about 1 year and a half later the NCR eventually took Edcon to the National Consumer Tribunal (NCT) over these club fees which the National Credit Regulator (NCR) said cannot be charged to consumers. The NCR felt this way because the National Credit Act and Regulations set out what fees can be charged by a credit provider for credit and a “club fee” is not one of these fees. The Tribunal ruled in favour of the NCR and said these fees are illegal and should be repaid.
‘This meant that Edcon would have to repay around R4.7 Billion’
Edcon were in a tough spot because this would mean they had to repay Billions of Rand and that may potentially drive them under. They then decided to take the matter to the High Court to try and see if they could have the NCT ruling overturned.
The matter was eventually heard and arguments made. For the longest time, a ruling was pending. Finally, after ages, the ruling is in and this month the North Gauteng High Court ruled that the Edcon club fees are not actually illegal.
The court ruled that because consumers can opt in or out of the club and can choose to pay these fees or not this is not part of the “cost of credit’ which is what the NCA regulates. The consumer’s credit agreements also do not demand that consumers belong to the club and they can leave the club whenever they want.
This is an interesting ruling as it sets the precedent that not only fees set out in the NCA or Regulations can be charged by a registrant (like a credit provider, PDA, credit bureau or Debt Counsellor). It appears that as long as the fees do not directly conflict with the requirements of the NCA and as long as the consumer can voluntarily decide to accept the extra service or not that such fees may indeed be legal.
For example, a Debt Counsellor may offer a consumer client the voluntary opportunity to draw a credit report from a credit bureau during their debt review and the consumer may then pay for this service. If considered in light of this ruling, that would not be a breach of the NCA even though the NCA and regulations do not mention any such fees that a Debt Counsellor can charge (it only mentions one small R50 fee – but that’s a discussion for another day).