Bain's Edcon Faces Penalties After S. Africa Regulator Probe

  • National Credit Regulator recommends fine for clothes retailer
  • Edcon charging consumers a fee for clubs linked to store cards

Edcon Holdings Ltd., the clothing retailer controlled by U.S. private-equity firm Bain Capital Partners LLC, faces a fine and other penalties after a South African regulator found it had breached the National Credit Act.

Edcon, which operates outlets such as Jet and Edgars, has been wrongly charging consumers a fee for clubs linked to store cards that shoppers use at its franchises, the Johannesburg-based National Credit Regulator said in an e-mailed statement on Friday. The regulator has referred Edcon to the National Consumer Tribunal and recommended that the retailer pay a fine, refund affected shoppers and discontinue the practice, the NCR said.

Losses at Edcon, bought by Bain in 2007, widened to 828 million rand ($60 million) in its first quarter ended June from 499 million rand a year earlier. The retailer, burdened with more than 20 billion rand in debt, appointed Bernard Brookes to replace Chief Executive Officer Jurgen Schreiber at the end of September.

Edcon is the second retailer to be referred to the tribunal in less than a month, with the NCR recommending on Oct. 14 that Shoprite Holdings Ltd., South Africa’s largest food retailer and an operator of furniture stores, be fined for reckless lending.

“Our legal team is studying the notice of motion and the supplementary documents to better understand the regulator’s position,” Debbie Millar, a spokeswoman for Edcon, said in an e-mailed response to questions, adding that Edcon will issue further statements on the matter in time.

Club membership is an optional product, according to Edcon. Prospective and existing credit customers can sign up and it entitles them to benefits including discounted movie tickets, legal assistance and educational benefits, the retailer said.

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