Standard Bank’s relief measures may contravene National Credit Act

Standard Bank is possibly contravening the National Credit Act because of the way it is implementing the coronavirus disease (Covid-19) interim debt repayment financial relief measures for its small business and student customers.

However, National Credit Regulator (NCR) media liaison officer Lebogang Selibi said this week in a response to a list of questions emailed by Moneyweb that the NCR has “no comment” on the issue.

Selibi ignored a follow-up email in which Moneyweb asked for an explanation on why the NCR did not have any comment. Standard Bank announced the interim debt repayment measures on Sunday, March 22.

In a media statement, Standard Bank said the payment relief for the bank’s small enterprise customers with turnover of less than R20 million will commence on April 1 and run through to the end of June.

‘Automatic new payment terms’

The bank said it will “set up automatic new payment terms” for these small business owners. It said this measure will not only assist its small business clients in managing their cash flows, but also allow them to honour payments to their own employee base.

Standard Bank South Africa chief executive Lungisa Fuzile was quoted as stating: “The relief will come from capitalising the interest and fees typically paid to the bank each month and changing the terms of repayment to a later date.

“This, we hope, will relieve cash flow constraints currently caused by the Covid-19 outbreak.”

The bank added that all student customers still studying full time with a Standard Bank student loan will receive a payment holiday over the same period at 0% interest and with zero fees.

“The payment holiday for small enterprise and student customers is an automatic offer that requires no action from customers, except if they want to opt out,” Standard Bank said.

Negative option marketing

However, negative option marketing was prohibited by the government in 2004 following an investigation by the former Business Practices Committee at the Department of Trade of Industry in terms of the Unfair Business Practices Act.

Negative option marketing is the promotion of goods or services to consumers on the basis that an agreement automatically comes into existence unless the consumer declines an inducement or offer.

The investigation into the practice concluded: “It is unfair to expect a consumer who does not wish to enter into a transaction to take active steps to prevent the transaction from going through.”

Several other South African banks have made offers to assist their clients because of the impact of Covid-19 but these offers do not automatically come into existence. Clients have to specifically engage with their banks to take up these offers.

The government prohibition on negative option marketing was later incorporated into both the Consumer Protection Act and the National Credit Act.

Section 74 of the National Credit Act specifically deals with negative option marketing and opting- out requirements.

Among other things, this section states that a “credit provider must not make an offer to enter into a credit agreement, or induce a person to enter into a credit agreement, on the basis that the agreement will automatically come into existence unless the consumer declines the offer” and “a credit provider must not make a proposal to alter or amend a credit agreement, or induce a person to accept such an alteration or amendment, on the basis that the alteration or amendment will automatically take effect unless the consumer rejects the proposal”.

Bank does not see payment holiday as ‘marketing’

Standard Bank spokesperson Ross Linstrom said in response to a request for comment that the bank does not view the payment holiday “as marketing as envisaged in the National Credit Act”.

“We are not granting consumers credit but rather granting an indulgence to assist them during this difficult time.

“We are fully transparent in that interest will continue to run. Please note that any customer who does not require the indulgence can continue to pay their instalment as per the agreement and the payment holiday will not be applied.

“Any customer may contact us at any point, to discuss their needs during this time,” he added.

The National Small Business Chamber (NSBC) said the way Standard Bank is implementing the interim debt relief measures to its small business clients is “not acceptable”.

The NSBC is a non-profit membership organisation whose primary aims include to foster the sustainability and growth of the small and medium-sized enterprise (SME) sector.

Clients must have choice

Mike Anderson, founder and CEO of the NSBC, said this week that all small business clients have the right to be fully aware of how Standard Bank is implementing the interim debt relief measures and “must have the choice not to have their debt agreements amended, not merely by opting out”.

Anderson does not believe the way Standard Bank has unilaterally implemented its interim debt repayment measures is in the interest of small businesses because “there are many small businesses who are not in distress and don’t need their debt repayments amended”.

He added that there are many small businesses who want to pay off their debt as quickly as possible.

“All small business clients need to be fully aware and elect to have or not have their debt repayment amended. Just by opting out to prevent the debt being amended is not acceptable,” he said.

Anderson said the NSBC will immediately inform its SME members and request feedback from Standard Bank on this issue.

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