Summit Set Sights on Capitec
Summit Turn on Former Client
Summit Financial Partners are taking there former client Capitec Bank to court over reckless lending allegations involving the banks multiloan credit products.
In court papers filed at the Stellenbosch Magistrates court Summit have claimed that Capitec Bank are disguising its multiloan credit products which are presented as a series of short term payday loans. These loans given over a short term attract a (normal) high initiation fee. The initiation fee which is allowed for under the National Credit Act in fact, all banks (and other credit providers) charge these fees. The initiation fee is there, in part, to help creditors cover the costs of doing an affordability assessment to check the consumer can actually afford to repay the loan.
Summit CEO Clark Gardner claims that the proper checks are only done on the first application and that up to 11 more advances can be granted by simply answering 3 simple questions via an ATM with no human oversight. They feel this is not up to standard and may result in reckless credit granting. Reckless Credit is credit granted (1) without doing proper checks, (2) abiding by the out come of such affordability checks, (3) not providing the consumer with enough documentation explaining the T&Cs and costs or (4) giving a person credit they can’t actually afford.
‘Capitec Bank point to the uptake in this product as indicative of where consumers stand economically and financially at present..’
Summit are also of the opinion that many consumers are essentially getting trapped in a cycle of taking more of these Capitec loans to pay loans, though Capitec Bank point to the uptake in this product as indicative of where consumers stand economically and financially at present and not as being specific to their product. They feel confident in regard to their product.
Summit say they have been aware of this matter for some time and have asked the Regulator (NCR) to get involved but have been forced to take the legal route as they have not had any joy from the Regulator. The NCR are indeed aware of the claims and say they are speaking to the Reserve Bank as the matter involves a bank though they have not yet indicated what their view is and if they are or have investigated the product.
Capitec Bank are set to defend the matter. Carl Fischer (Capitec Bank) says:” The loan in question is a one-month loan similar to what other banks provide and is structured to enable easier access for clients. The dispute is of a technical nature and the process of credit assessment and pricing are in accordance with the requirements of the National Credit Act. We strongly disagree with the allegations made regarding its legality… We believe statements and allegations have been made that are not correct, due to a technical misunderstanding of the product.“