The National Credit Regulator (NCR) was within its rights to open an investigation into instant loan company Dacqup Finances on reasonable suspicion that it violated the National Credit Act (NCA), according to a Supreme Court ruling in appeal made last week.
Dacqup, trading as ABC Financial Services, a registered credit provider, offered “instant” micro-loans of up to R8,000.
The company had engaged in repeated wrongdoing and in doing so aroused the suspicions of an RNC inspector who noticed a sign offering ‘instant loans’. If the loans were instant, the inspector felt the business would struggle to comply with the onerous accessibility assessments required by the NCA.
The inspector entered the premises posing as a customer and asked about the possibility of taking out a loan, and was told that the interest rate was 30% per month on short-term loans. term – which is much higher than that permitted by law.
The NCR filed a complaint against Dacqup with the National Consumer Court, which found that the company violated several provisions of the NCA. The court sentenced her to pay a fine and to have all of her credit agreements assessed by an independent auditor for a certain period.
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Dacqup successfully appealed these orders to the North Gauteng High Court. This success was based on a technical point, without the merits of the case having been discussed.
The case ended up before the SCA, confirming NCR’s argument that once a complaint has been made by an NCR inspector or any other person under the law, the NCR is in its right to initiate an investigation.
The SCA decision indicates that the approach adopted by the High Court “confused the notion of reasonable suspicion with At first glance evidence”. The High Court previously found there was no reasonable suspicion to bring a complaint, which has now been overturned by the SCA.
“As our courts have repeatedly stated, reasonable suspicion contemplates a lesser burden than that of At first glance evidence,” the judgment says.
In other words, an inspector in the NCR would not need to obtain a loan to obtain At first glance evidence of a violation of the law.
“In all the circumstances, I am satisfied that the NCR has demonstrated that it had a reasonable suspicion to initiate an investigation into the activities of Dacqup,” reads the judgment.
Dacqup wanted NCR to pay listeners
There was also the question of whether the Court was within its rights to order Dacqup to appoint an auditor to assess the amount consumers had been overcharged.
Dacqup argued that NCR should bear this cost, although SCA reported several other instances where independent auditors had been appointed to determine the extent of illegally obtained profits. Implicit in these orders is that the entity concerned must pay the costs of the auditor.
“There is no reason why the cases involving the NCR should be any different, particularly given the broad powers granted to the court to make any appropriate orders relating to prohibited conduct,” the judgment reads.
Dacqup’s successful appeal to the North Gauteng High Court was quashed and the company was ordered to pay the costs of the case.