Net1 credit unit’s future threatened
Moneyline breached law, says regulator
CAPE TOWN — A financial services subsidiary of JSE-listed Net1 is being threatened with the loss of its registration and the ability to operate because of its alleged breach of the National Credit Act.
Moneyline Financial Services is accused by the National Credit Regulator of granting credit to the beneficiaries of social grants without conducting proper affordability assessments.
The regulator has asked the National Consumer Tribunal to cancel Moneyline’s registration for breaching the act.
This is the latest blow in what has been a bumpy year for Net1, which is also listed on the New York-based Nasdaq. The company derives most of its $582m in global revenue from SA ($428m).
Its share price was down R1.10 in yesterday’s trading and closed at R148.90.
Social Development Minister Bathabile Dlamini, the Social Services Agency of SA (Sassa) and several nongovernmental organisations claim Net1’s financial service companies are using data of social grant beneficiaries to market their products and to deduct monthly amounts from the grants as repayment for the credit.
Net1 CEO Serge Belamant has
strongly denied the allegations.
The National Credit Regulator said yesterday that its investigation had revealed that Moneyline had treated grants for child and foster child support — meant for the upkeep of the children — as income when assessing the ability of consumers to pay for the credit it extended to them.
There are about 16-million grant beneficiaries, of whom about 12-million are children.
“The use of child support grants and foster child grants as income for the purposes of conducting affordability assessments on credit applications is totally unacceptable,” National Credit Regulator CEO Nomsa Motshegare said yesterday.
“It deprives children of money meant to provide for their daily necessities.”
The regulator said Moneyline had also extended credit to social grant beneficiaries without assessing their debt repayment histories, or without taking into account their monthly living expenses, as required by the act.
“The credit agreement provided by Moneyline Financial Services to consumers is not in the prescribed form and does not contain crucial information about the rights and obligations of consumers,” Ms Motshegare said.
The regulator also accused Moneyline of not keeping documentation to support the affordability assessments relating to consumers’ income and debtrepayment histories.
This is bad news for Net1 and follows a Constitutional Court ruling in April that the R10bn, five-year contract awarded by Sassa to another Net1 subsidiary, Cash Paymaster Services, was “constitutionally invalid” and that Sassa would have to issue a new one for a five-year period.
The legal challenge was brought by the rival bidder for the contract, Absa Bank’s Allpay Consolidated Investment Holdings, which claimed there had been irregularities in the tender process.
Sassa is implementing the court ruling.
Allpay’s claims sparked a probe of Net1 by the US justice department and the US Securities and Exchange Commission.
Ms Dlamini threatened Net1 earlier this month with court action within 14 days if it did not sign a reworked service-level agreement guaranteeing the confidentiality of beneficiary data.
The revised agreement would also prohibit third-party deductions from grant payments.
An estimated 1-million people are understood to be caught in the net of deductions made from Sassa-branded accounts with Grindrod Bank.
Ms Dlamini said access to grant beneficiaries’ confidential data, such as identity numbers, bank and contact details and biometric information, was fuelling the marketing and sale of financial products.
The 10-million bank accounts of the beneficiaries were at risk of ambush marketing and fraudulent sales were on the increase, she said.
The minister said numerous complaints had been received from grant beneficiaries who had not authorised deductions for loan repayments, prescribed debt, multiple funeral schemes, advance electricity and airtime.
But Mr Belamant insisted he would refuse to sign a revised service-level agreement.
He said the subsidiaries in the Net1 group, such as EasyPay and Moneyline, had been active in the market for many years and if there were an overlap in their clientele with social grant beneficiaries, this was a coincidence and was not because these companies had access to clients’ data.
The companies were definitely not involved in making unlawful deductions, he said.
The 2014 Net1 annual report noted the risk posed by the reissue of the tender to its business.
“In addition, our Sassa contract has enabled us to offer a variety of innovative financial and other services, such as loans and procurement of prepaid airtime, to our social welfare recipient cardholders,” the report stated.
“If we were to lose our Sassa contract, it might be less convenient for our cardholder customers to purchase these services from us and we may have difficulty growing or even maintaining this aspect of our South African business, which would negatively affect our future operating performance.”