Capitec Bank Holdings Ltd., South Africa’s biggest provider of unsecured loans, is being sued for allegedly breaking the country’s credit laws by Summit Financial Partners, a company that helps consumers work their way out of debt. Capitec denied the allegations.
Summit said Capitec has breached the National Credit Act in court papers that were filed in both Cape Town’s High Court and the Magistrates Court in nearby Stellenbosch over the past 10 days and served on the lender, Clark Gardner, the chief executive officer of Summit, said by phone on Wednesday.
“Capitec Bank remains committed to operate and keep operating within the laws of South Africa,” spokesman Charl Nel said in an e-mailed response to questions. The Stellenbosch-based company is aware of the court challenge and will respond accordingly, he said. “Our unique business model has given millions of South Africans access to financial services.”
Summit has focused on Capitec’s so-called multi loans and its alleged refusal to supply contracts and other paperwork when requested to do so by clients, it said. With a multi loan, a customer signs one contract and can access the facility every month for 12 months. After the first month, affordability assessments are no longer done, while a 12 percent initiation fee is charged every month, according to Gardner.
“Capitec is a payday lender in disguise and payday lenders are killing our society,” he said. “Capitec’s multi loans are reckless, and a court could make them void and write them off. If we got rid of payday lenders, consumers in South Africa would be much better off.”
Shares in Capitec fell as much as 3.9 percent to 557 rand, and were trading 3.5 percent down at 559.52 rand by 12 p.m. in Johannesburg, the biggest decline in the seven-member FTSE/JSE Africa Banks Index, and lowest level on a closing basis since March 16.
Johannesburg’s Business Day newspaper reported the court case earlier.