The National Credit Regulator (NCR) was within its rights to open an investigation into instant loan company Dacqup Finance over reasonable suspicion that it violated the National Credit Act (NCA), according to a Supreme Court ruling of Appeal (SCA) rendered. Last week.
Dacqup, trading as ABC Financial Services, a registered credit provider, was caught offering ‘instant’ micro-loans of up to R8,000 at illegal interest rates.
The company had previously engaged in repeated prohibited acts and on that occasion aroused the suspicions of an NCR inspector, who noticed a sign offering instant loans. If the loans were instant, the inspector explained, the business would struggle to comply with the onerous affordability assessments required by the NCA.
The inspector entered the premises, posing as a customer, asked about the possibility of taking out a loan and was told that the interest rate was 30% per month on short-term loans – 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 ordered the company to pay a fine and to have all its credit agreements for a certain period assessed by an independent auditor.
Dacqup subsequently successfully challenged these orders in the High Court in Pretoria. This success was based on a technical point, without the merits of the case being discussed.
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After that, the matter ended up before the SCA, which upheld NCR’s argument that once a complaint had been made by an NCR inspector, or any other person, under law, the NCR was within its rights to initiate an investigation.
The SCA decision said the approach taken by the High Court erred in confusing the notion of reasonable suspicion with a prima facie case. 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 a prima facie case,” the decision states. In other words, an inspector in the NCR would not need to obtain a loan to obtain prima facie evidence of a violation of the law.
” In all circumstances, [the court is] satisfied that the NCR has demonstrated that it has a reasonable suspicion to initiate an investigation into the activities of Dacqup,” the judgment reads.
This article was republished from Moneyweb with permission