Cape Town - An instant loans company that was caught on the wrong side of the law following a 2018 sting operation has lost a court battle against the National Credit Regulator (NCR) to nullify the investigation over tactics used in the investigation.
The Supreme Court of Appeal has found that the NCR was well within its rights to launch an investigation into Dacqup Finances on the reasonable suspicion that it was violating the National Credit Act (NCA).
The court heard that in 2018, during a scouting exercise, an NCR inspector noticed a signboard outside Dacqup’s premises advertising instant loans.
This aroused the inspector’s suspicion for a variety of reasons. If the loans were instant, it would be difficult to comply with the onerous affordability assessments required by the NCA.
Conversely, if they were not instant, the advertisement breached the NCA’s prohibition on misleading and deceptive advertising of credit.
Posing as a potential customer, the inspector entered the premises to enquire about a prospective loan. Upon enquiry about the interest rate, the inspector was told that an interest rate of 30% a month was levied on short-term loans.
This amount was far higher than the then-prescribed rate of interest of 10% a year and the information led to the NCR initiating a complaint against Dacqup, which is a registered credit provider.
The complaint was considered by the National Consumer Tribunal, which ordered Dacqup to pay a fine. Dacqup successfully appealed against those orders in the high court.
Unhappy with the result, the NCR took the matter up at the SCA which found last week that the NCA gave the NCR certain investigative and referral powers and that the concept of reasonable suspicion was commonplace in South African law.
The SCA said hearsay evidence was sufficient to ground a reasonable suspicion. These suspicions were set out in the memorandum of the inspector and amplified in the NCR’s founding affidavit.