From the news desk

Cash Converters facing possible fine

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Second-hand goods retailer Cash Converters is facing a possible fine for several breaches of the National Credit Act, stemming from its cash-advance loans services. This comes amidst growing criticism directed at companies that offer ‘pay-day’ loans, seen as a major factor in pushing people into an endless cycle of debt.

Many locals have taken to using Cash Converters as a means of securing short temporary loans, through pawn brokering transactions. This means goods are handed over as security for a loan, and handed back once the loan has been paid off. Alternatively, consumers are also able to take out a normal pay-day loan, which will be deducted from their next pay slip.

“The pawn broker doesn’t have to conduct an affordability assessment because they receive the goods from the consumer as security. If the loan is not repaid, then the broker can sell those goods in order to recover the amount of the loan,” explained company secretary of the National Credit Regulator, Mr Lesiba Mashaba.

Cash Converters is reportedly in violation of two aspects of the act. The main violation relates to pawned goods that are damaged or lost whilst in the company’s possession. Under the act, the broker would be required to refund and compensate the owner in full. However, Cash Converters were being accused of only compensating based on the amount of the loan and not the market value of the goods itself.

“If you pawn a watch that is valued at R5000 and the loan is R2000, what it means is if that watch is stolen or lost whilst it is with Cash Converters, they will only pay you R2000 as compensation,” he explained.

Cash Converters were also being accused of failing to undertake the proper payback and affordability assessments when issuing loans. The expenses of the loan takers were also not being verified.

“The last aspect is around debt repayment history, or looking at other loans that you have and whether you are paying them. What we find is that many credit providers will still lend to a consumer who is 9 months in arrears on one or two loans,” he said.

Cash Converters are now facing a major fine for the breaches, with the maximum amount they can be issued with is 10% of the company’s annual turnover. The amount of the fine will be argued in front of the National Consumer Tribunal. The regulator is also hoping the tribunal will issue an interdict against the company, barring it from continuing such contraventions of the law. VOC (Mubeen Banderker)


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