Spring represents a new beginning and the start of all things warm. It is also that time of year when everyone starts gearing up for a new summer wardrobe and the December holidays that are fast approaching. It’s out with the old and in with the new, but have you considered the impact on your financial situation?
10 July 2015
DebtBusters notes with concern Summits’ mystery shopping experience findings, which alleges that some of Lewis’ staff members violated the rules of the National Credit Act (NCA) and charged more than the industry norm when it comes to selling credit life insurance, which it bolted on to a credit application quote.
“Summit said that credit life insurance charges of R6,201 were added and sold to the mystery shopper who claimed to be self-employed. Retail stores are not the only culprits who charge more than what they should when it comes to this type of cover. We have found time and time again that microlenders overcharge borrowers when they bolt credit life insurance onto loans,” said Ian Wason, CEO of DebtBusters, South Africa’s largest Debt Counsellor.
“In a recent review of credit life charges by mainstream credit providers, DebtBusters uncovered some horrific practices in the marketplace. Findings indicate that although some credit providers, particularly the banks, fall below the dti’s anticipated R4.5 per R1000 borrowed limit, almost all other credit providers are charging far in excess of this, with the average ‘non-bank’ consumers paying over R12 per R1000 borrowed. Furniture retailers are generally charging the highest rates as multiple insurances are bundled into credit life; in some instances credit life charged exceeds R20 per 1000 borrowed, resulting in hundreds of Rands per month being shelled out by consumers towards credit life insurance.
Often, lenders dissuade borrowers from shopping around for more competitive credit life insurance premiums as they insist that consumers find a policy that has similar terms and conditions to their own. Obviously this would dissuade most desperate borrowers and this is partly why borrowers find themselves in a cycle of debt that they can’t get out of.
Summit added that the mystery shopper was still charged for Loss of Employment even though the policy stated that a person who is self-employed cannot claim under this policy. This all points to a need, not only to educate consumers about this type of insurance but all those who sell the product on too, particularly in the retail stores. Lewis must also be held accountable for selling credit life insurance at such exorbitant rates,” added Wason.
Wason pointed out that Treasury is yet to publish details of the credit life cap, which has been approved and submitted to them by the dti. “It’s important that Treasury consults all the stakeholders involved, ties up any loose ends or questions it has now so that consumers are protected. Credit Life has been the one of the greatest rip offs of our time – and we desperately need that cap as a start, followed up by some decent guidance and regulation,” said Wason.
DebtBusters also welcomes the National Credit Regulator’s swift response in referring Lewis Stores Ltd (Lewis Stores) and Monarch Insurance Company Ltd (Monarch), the group’s short term insurance business, to the National Consumer Tribunal (Tribunal) for further investigation but Wason added: “It’s time government stepped in to prevent credit providers from making their money from overcharging clients for credit insurance. Investigating Lewis alone is simply not enough. Following the outcome of the Lewis investigation by the NCR’s tribunal, there needs to be a wider investigation into other retailers and microlenders that offer this type of product.”