- Policies sold to pensioners, customers on state age grants
- Regulator calls for policy refunds, write-off of loans, fine
Shoprite Holdings Ltd., South Africa’s largest food retailer and an operator of furniture stores, is being investigated for reckless lending practices, the country’s National Credit Regulator said.
Two of the company’s units, Shoprite Investments and Shoprite Insurance, sold job-loss insurance and occupational disability cover to pensioners and consumers who are receiving government social grants for the elderly, the Johannesburg-based regulator said in an e-mailed statement on Wednesday. Shoprite also sold a consumer a job-loss insurance policy for a six-month loan that had a waiting period of six months, said the NCR, as it’s known.
The South African government has been cracking down on reckless lending as highly indebted consumers struggle to repay loans amid a deteriorating economy and rising interest rates. The NCR investigated and fined African Bank Investments Ltd. before it collapsed in August last year. It has also probed practices at Capitec Bank Holdings Ltd., which provides unsecured loans to low-income earners. While the banks are regulated by the central bank and various laws, furniture retailers face fewer rules.
Shoprite isn’t able to comment because it hasn’t yet received any formal documentation from the regulator, Sarita Van Wyk, a spokeswoman for Shoprite, said in an e-mailed response to questions. “Once such documentation has been received, the relevant allegations will be investigated immediately.”
Shoprite dropped as much as 3.4 percent, the most in a month. It was 0.3 percent lower at 157 rand as of 11:47 a.m. in Johannesburg trading.
“The sale of retrenchment and occupational disability covers to pensioners and consumers receiving government social grants is unreasonable and imposes an unreasonable cost to such consumers because they cannot claim benefits under these covers,” Jacqueline Boucher, a manager at the NCR, said in the regulator’s statement.
The matter has been referred to the National Consumer Tribunal for breach of the National Credit Act, the NCR said. The tribunal should order Shoprite to refund the affected consumers, write off the reckless loans and pay an administrative fine, the NCR said.