Business Practices Committee Report 78Interest Recalculators3. Further Complaints and Resolutions |
Notwithstanding the order by the Minister, the BPC unfortunately continued to receive a steady flow of complaints against various recalculators (8). It would appear that there were recalculators who eluded the order of the Minister. The following are two examples:
| a) | A proprietary company performing recalculations, required that its clients sign a document stating inter alia: "I accept to pay the costs in respect of the recalculation of interest on the statements amounting Rx". After the Minister prohibited the taking of monies in advance to do recalculations, this particular propriety company was replaced by a close corporation ("X") with a name similar to that of the (Pty) Ltd. Now clients were required to sign a document which stated inter alia: "I the undersigned herewith purchase the necessary software package from ‘X’ to enable myself to manage my loans, as referred to above for the amount of R2 500". "X" undertook to capture the data in respect of the client’s bond for a certain period "free of charge". This approach, that is, selling software packages to clients to do their "... own interest calculations", is apparently followed by other "former" calculators. |
| b) | Another approach followed by "former" recalculators is to conduct an "audit" of the clients’ financial information. These "auditors" do not take up-front payments, but demand payment when the results of the "audit" are made available to clients. The clients could then approach their banks to recoup the interest "overcharged" or they could request the "auditing" form to recover the amounts for them. The .. rendering of such service in full" in the prohibition by the Minister, according to these calculators, is thus not applicable to them. These "former" calculators argue that, after presenting a client with the results of the "audit", the service has been rendered in full. Obviously, only a court of law is in a position to comment on the question whether Notice 2422 dated 23 October 1998 applies to a particular recalculator. The Committee is not in a position to comment on this question. |
It further appeared that consumers continued to be misled by statements, or the tack of statements about the real facts, made by the recalculators, the sellers of software packages to calculate interest and "auditors" of bank statements. The BPC thus resolved on 23 March 1999 to:
| i) | undertake ad hoc section 8(1)(a) (9) investigations into the business practices of: |
| a) | Financial Research Foundation (Pty) Ltd (96/17090//07), a division of Financial Research Corporation (Pty) Ltd (94/07073/07), AL Friedman, FJL Friedman, LP Friedman, Michelle Friedman, Fritz Friedman and any director, employee, agent and/or representative of any of the aforementioned in respect of the activities of Financial Research Foundation (Pty) Ltd and Financial Research Corporation (Pty) Ltd. Notice of this section 8(1)(a) investigation was published in the Government Gazette of 23 April 1999. |
| b) | Entity "A" (10) and any of its directors, employees, agents and/or representatives. |
| c) | Entity "B" and any of its directors, employees, agents and/or representatives. |
| d) | Entity "C" and any of its directors, employees, agents and/or representatives. |
| ii) | revisit the business practices of recalculators by undertaking a further section 8(1)(b) (11) investigation into their business practices. |
3. Notice of the section 8(1)(a) investigation
On 1 April 1999 the BPC published Notice 517 of 1999 in Government Gazette No 19896. This notice read as follows:
"On 12 September 1997 Notice 1325 of 1997 was published in Government Gazette 18263. The notice stated inter alia:
‘In terms of the provisions of section 8(4) of the Harmful Business Practices Act, 1988 (Act No 71 of 1988), notice is herewith given that the Business Practices Committee intends undertaking an investigation in terms of section 8(1)(b) of the said Act into the business practice whereby "interest recalculators", as defined in the Schedule, require payment in advance (an up-front consideration) for services to be rendered’.
The end result of this investigation was that the Minister declared unlawful the business practice of recalculators whereby they receive money for the performance of any service that an interest recalculator has agreed to perform for a consumer before such service is fully performed. Service fully performed was defined as fulfilment of all the services offered to the debtor, and the creditor has agreed to or rejected any claim for reimbursement in writing. The creditor must have agreed to or rejected the claim within 90 days after receipt thereof, failing which the service was presumed to have been fully performed.
In spite of the order by the Minister, the Committee unfortunately still receives a steady flow of complaints against recalculators. It would appear that there are interest recalculators who elude the order of the Minister. It further appears that consumers could be misled by statements made by these recalculators. The Committee thus resolved to revisit the business practices of recalculators, hence the following notice.
‘In terms of the provisions of section 8(4) of the Harmful Business Practices Act, 1988 (Act No 71 of 1988), notice is herewith given that the Business Practices Committee intends undertaking a further investigation in terms of section 8(1)(b) of the said Act into the business practices of interest recalculators. This would include a reconsideration of payment in advance for services to be rendered as well as other possible harmful business practices.
Any person may within a period of 14 days from the date of this notice make written representations regarding the above-mentioned investigation to:
The Secretary, Business Practices Committee, Private Bag X84, PRETORIA, 0001. Tel: 012-310-9562 Fax: 01 2-320-0579 Ms L van Zyl Ref. HI 01/20/10/10(99)’".
The following entities were informed by letter or fax on 8 April 1999 of the impending section 8(1)(b) investigation: AHI, ATOP Rente Ondersoekburo, Beder-Fried land Inc, Consumer Institute, Council of South African Banks, Farmers’ Weekly, Mr EC van Zyl, secretary of Finansiële Konsultante van Suid-Afrika, Mr JL Krause (attorney of FinCure), WN Reyneke Inc (attorney of Financial Research Foundation), Mr JT Muller (managing director of International Interest Corporation, Interest Settlement Corporation and Bankbusters at P 0 Box 50803, Waterfront), Landbouweekblad, Leander Wiid Attorneys, Lemmer & Associates, MLX Beleggings t/a TradeFirst, NAFCOC and StarLine.
On 23 May 1999 the Business Times published an article with the heading "Don’t let interest recalculators tempt you".
| 8) | It appears that there are no firms involved in inter alia interest recalculations who call themselves "interest recalculators". A particular recalculator was adamant that he should not be called as such. It would seem that recalculators resent being called "interest recalculators". Apparently they wish to disassociate themselves from the wrongs in the industry. |
| 9) | A section 8(1)(a) investigation in terms of the Act enables the committee to undertake an investigation into any unfair business practice which it or the Minister has reason to believe exists or may come into existence. The target of this type of investigation is a specific person or business. |
| 10) | The notices of the section 8(1)(a) investigations into this entity and the entities in (c) and (d) below have, for various reasons, not yet been published in the Government Gazette. The entities will be referred to as entity "A" "B" and "c" respectively. |
| 11) | A section 8(1)(b) investigation in terms of the Act enables the committee to undertake an investigation into any business practice in general, which, in the opinion of the committee or the Minister, is commonly applied for the purposes of or in connection with the creation or maintenance of unfair business practices. The target of this general type of investigation is a specific business practice. |