National Credit Regulator versus Edcon Holdings Limited
Background The NCR referred a complaint to the National Consumer Tribunal (“NCT”) in terms of section 140(2) (b) of the National Credit Act, 32 of 2005 (“NCA”) wherein the NCR required the NCT to determine whether or not a club fee is in fact a cost of credit.
The NCR alleged that club membership fees are a cost of credit and charging such fees under the credit agreement is prohibited under the NCA.
Edcon’s Response to the Judgment Edcon has noted the NCT’s judgment issued on the 24 April 2017 that disallows the charging of a club fee to the credit agreement or credit facility. We are in the process of studying the judgment and will appeal the order. It is important to note that this recent judgement relates to the merits of the issue, and does not deal with any sanction, which will only be determined at a later date. This matter has therefore not been finalised, and we therefore can’t comment further on this particular issue.
Edcon has always contended that the club product is a stand-alone product, which entitles voluntarily signed-up members to a number of benefits including preferential rates and savings with many of our affinity partners. These can be found on the Edcon website and include benefits in health and wellness (gyms and spas), entertainment (such as movie and theatre tickets), travel benefits (like flight, accommodation and car rental), peace-of-mind service benefits (such as funeral and emergency services for medical, home and roadside assistance), as well education benefits (for, specifically, various after-school courses). Edcon estimates that a Club member can save up to R17 000 per member over a twelve month period if all the benefits are used on a regular basis.
The issue being contended by the NCR relates to the fact that the Club fee is not on the list of charges that are allowed to be charged on a credit agreement in terms of the NCA. However, it is not the Club product or membership that is under contention.
Edcon, having obtained extensive legal advice from its counsel on the issue, contends that:
· The concept of a Club product, with its associated benefits, is a well-established practice globally; · The Club product represents a basket of value added services and benefits which a customer receives in return for payment of a consideration. This consideration is known as a “Club fee”; and · Edcon provides a revolving credit facility to its customers in order for its customers to make purchases of its goods and services. This facility is operated through the means of the store card, which is analogous to a credit card issued by a bank.