Johannesburg – While it previously staved off allegations of reckless lending, Capitec Bank has been found guilty of the practice.
The Mpumalanga High Court has ruled that the bank lent nearly R100 000 to an employed but over-indebted man without due diligence.
Thulani Mahlangu, from KwaMhlanga in Mpumalanga, was lent the money on grounds that he had a household additional income of R5 000.
A debt counsellor discovered during a debt review, conducted at Mahlangu’s behest, that Capitec lent the loan despite not having proof of this additional income.
The additional household income should have been calculated as zero because it did not exist, the debt counsellor found.
She concluded that Capitec did not conduct an affordability assessment, as required by the country’s legislation.
The debt counsellor took the matter to the KwaMhlanga Magistrate’s Court, which ruled that indeed Capitec lent recklessly.
Capitec then took the matter to the Mpumalanga High Court to attempt to appeal the magistrate’s ruling.
It argued before Judge Vincent Ratshibvumo that the magistrate erred in finding that it was obliged to do household income assessment in calculating Mahlangu’s affordability as he qualified for a loan on his own individual assessment.
The bank maintained there was no evidence presented before the magistrate that the household income Mahlangu disclosed prior to signing the credit agreement was not true.
On this score, the magistrate erred in not accepting that Mahlangu had an additional household income of R5 000.
Judge Ratshibvumo poured to this argument, saying it was misplaced because it was not disputed that Mahlangu stated that he had such an additional household income.
“The dispute was on whether the appellant (Capitec) had an obligation to assess and investigate this disclosure,” he said in the judgment he handed down this week.
“What had a bearing was the appellant’s failure to properly assess it, to demand documentary proof thereof.”
The bank had an obligation to uncover on its own if Mahlangu’s application particulars were truthful.
“Had a proper assessment been done, the appellant would have known first if the figures disclosed were true,” said Judge Ratshibvumo.
“Further to this, the relationship between the consumer and the person in the household proximity would have been established together with their joint contributions and expenses into and from the household income.
“This was unfortunately not done and yet the credit agreement was entered into. This was nothing short of recklessness.”
He dismissed Capitec’s appeal application.
In 2018, consumer group Summit Financial Partners abandoned a case it had pursued against the bank for three years over alleged reckless lending.