Cape Town - Lewis Stores has been found guilty of infringing the National Credit Act (NCA), relating to credit insurance and disability cover sold to pensioners and self-employed consumers.
"The NCR [National Credit Regulator] considers this a great victory and will be returning to the NCT [National Consumer Tribunal ] to argue the imposition of a fine on Lewis Stores," said Jacqueline Peters, NCR manager for investigations and enforcement.
In July 2015 Lewis and Monarch Insurance Company were referred to the NCT for alleged breaches of the NCA, following an investigation by the NCR.
It revealed that loss of employment cover as part of credit insurance was sold to pensioners and self-employed consumers; and disability cover as part of credit insurance was sold to pensioners.
Peters said the basis of the NCR’s referral was that the sale of loss of employment cover to pensioners and self-employed consumers was unreasonable and imposed an unreasonable cost on such consumers.
The same applied to the sale of occupational disability cover to pensioners where they no longer had an occupation.
The NCR in a judgment handed down on Wednesday agreed with the NCRs’ submissions and found that Lewis:
- had acted unreasonably by offering or demanding pensioners or unemployed consumers to take out loss of employment insurance;
- had acted unreasonably by offering or demanding pensioners to take out disability insurance; and
- was guilty of prohibited conduct for breaching the National Credit Act 34, 2005.
The NCT has also interdicted Lewis from engaging in this conduct in future.
It order the that an independent audit be conducted on all credit agreements entered into by Lewis since 2007, adding that all affected consumers, identified in the audit, be reimbursed the premiums paid for the insurance.
In May Lewis announced a 26.5% decline in full-year profits. It said it was caused by tough trading conditions in the credit retail sector, adverse economic conditions and the introduction of the National Credit Regulator's affordability assessment regulations. Group credit sales for the year were 4.5% lower. Credit sales in Beares account for 50% of the brand's total sales while in Lewis and Best Home and Electric 66% of total sales are on credit.
In March this year Lewis completed the acquisition of a portfolio of 57 Ellerines and Beares stores in four southern African countries. This expanded its store presence outside South Africa to 120, including in Namibia (21 stores), Botswana (20), Lesotho (10) and Swaziland (6).
