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Reckless Lending Report Shows Issues Surrounding Net1 Lending

For many years Net1’s Cash Paymaster Services (CPS) were the company responsible for handling social grant distributions for South Africans. At present, about a quarter of all South Africans have employment and about a third of all South Africans receive a social grant of one type or another. For many, it is the lifeline that they cling to to keep them afloat.

‘Net1 were the company responsible for handling social grant distributions for South Africans’

It is illegal for lenders to use social grants (like children’s grants) as collateral for debt. These figures are not meant to even be included in the calculations done to see if people can afford the debt or not (in what is called an affordability assessment). Such calculations should indicate that the person actually has enough money to repay the debt each month otherwise giving such a consumer a loan would be considered reckless.

If credit providers give consumers ‘reckless credit’ they face fines of up to 1 million Rand or a chunk of their annual earnings.

A recent report by the London School of Economics & Political Science along with human rights group Black Sash has shown that the systems set up by Net1 created an environment where lenders were able to take advantage of social grant recipients and which argues that there may be reckless lending issues at play.

Net1’s Web Around Grant Recipients

Moneyline (Net1’s credit arm) offers loans to those receiving grants. These loans had no interest portion attached. They did however have as many of the other allowable fees attached such as initiation and service fees. This effectively meant that grant receivers, who need little other than their ID to get a Moneyline loan,  were paying back an extra 50 – 112% on the original loan amount. Other media sources have reported on this issue in the past as far back as 2017.

Net1 are the parent company of Cash Paymaster Services (CPS) who went into business rescue as soon as the Post Office took over handling SASSA payouts in November 2018.

SASSA are owed around R300 million by CPS and have applied to have CPS liquidated. Since CPS is basically useless without the SASSA work Net1 have no objection to CPS being rolled up and closed down. SASSA stand to recover around R15 Million in CPS assets and maybe a little more besides but will definitely not recover the owed amount.

NCR Trying To Shut Down Moneyline

Over Time the CPS contract actually ended up costing Net1 (on paper at least) money and they seem to be more than happy to see the back of CPS. They no doubt also hope to avoid any fall out from accusations of reckless lending.

‘If credit providers give consumers ‘reckless credit’ they face fines of up to 1 million Rand’

The National Credit Regulator are busy trying to have Moneyline deregistered as a credit provider by the National Consumer Tribunal. Net1 are not happy about that and are opposing that matter.