Capitec CEO Gerrie Fourie says the bank is ready to go to court to challenge claims from Summit Financial Partners that it is offering unsecured loans in a manner that amounts to ‘reckless lending’.
Speaking in an interview with Bloomberg, Fourie said the bank will submit responding documents to court early next month challenging Summit’s claims, confident that the bank will win the case – though he remains concerned about reputational damage.
Earlier this month, Summit Financial Partners moved to sue Capitec, saying that its customers were able to borrow up to R5,000 each month under a loan product, which has since been discontinued.
Instead of being a short-term loan, the product was closer to a credit facility, or revolving credit account, Summit said.
The financial advisory firm, which helps its clients sort out debt problems, said that Capitec also charged a fee each time a customer took out a loan.
It accused the bank of failing to conduct affordability checks on its customers who took up successive short-term loans.
Capitec defended the loan in question, noting that it was a one-month loan similar to what other banks provide and is structured to enable easier access for clients.
The bank said that the court charges were brought due to this fundamental misunderstanding of how the product worked, adding that the product was discontinued and replaced with a credit facility in 2015.
According to Fourie, Capitec would “love to get out of this (small loan) market because it’s completely unprofitable – but South Africans want these types of loans.”
Capitec has been subject to a number of claims around unsecured lending, and is currently involved in a second investigation with the National Credit Regulator.
It said the Summit case will likely be resolved within a year, but noted that the NCR case could take longer.
Source: Business Tech