Several of the big South African retail chains are in trouble with the National Credit Regulator (NCR), which has accused them of contravening the National Credit Act by charging club fees with their credit agreements. Retailers maintain that they don’t, as it’s a product like any other they sell customers, who have a choice whether they want to join the club or not.

The act allows certain fees (such as initiation fees or interest on accounts) to be charged as part of credit agreements, but not other fees or costs, as specified in sections 90, 100, 101 and 102 of the National Credit Act. “We found in our investigation that there were other fees included in the credit agreements and these are prohibited charges,” says Caroline Young, legal advisor for the NCR.

Club fees are typically charged at a monthly fixed rate for ‘benefits’ such as funeral plans, rewards vouchers, magazines and discount offers.


In May, Edcon was ordered to refund club fees included in its credit agreements. NCR will ask Edcon to audit its loan book between 2007 and present day to establish how many consumers must receive refunds and to establish the total amount.

According to its results for the 39 weeks ended December 2016, Edcon collected R418-m in fees from 3.4-m active store account holders who are also club members. Account holders are charged between R39 and R60 per month and can receive benefits such as reduced airfares, roadside assistance, etc.

Since the judgement, the retail group has appealed the ruling. By appealing, the group doesn’t have to pay the refunds until the appeal has been heard. “We received numerous legal advices that the case we have is strong enough to get the original decision turned around,” says Edcon CEO Bernie Brookes, who adds that they will take it as high as the Constitutional Court. “We see the club card as a product. It’s a product that we sell, like any other product we sell in the store. The customer has a choice to buy the product and is then charged into their credit account so they can pay every month. We see this as not being illegal.”

“We maintain that we have not violated the NCA and expect to be vindicated in due course,” the retailer stated in their 2017 presentation of financial results to investors. “In this regard, we note that the Tribunal did not find (and could not have found) that the selling of a club product is unlawful in and of itself, rather, the finding was that the inclusion of club [fees] in a credit agreement is contrary to the NCA. Furthermore, we are of the view that no consumer could have been disadvantaged by choosing to purchase an option product and receiving full value for their purchase.”


Now the NCR has referred Mr Price to the National Consumer Tribunal, asking that the retail chain refund club fees that it charged customers who took loans for their purchases. NCR wants the tribunal to charge Mr Price an administrative fine for adding club fees to its interest bills, and to stop it from including these fees again in future credit agreements.

In its 2016 financial year, Mr Price gained R20-m from club fees, from 1.4-m active store accounts. In the current economic climate, with results as it already is, this will hurt the group badly if it has to pay it back. Miladys is the main culprit and represents 0.1% of the group’s R19.8-bn sales – it charges fees of R12.50 per month for club membership.

Its mrp, mrphome, mrsport and Sheet Street stores also offer mrpmoney cards and mrpinsurance cards, which offer account holders a range of benefits, and charge a monthly fee of R6.95.

The retail group will be asked to do an internal audit to determine 1) how many customers have been paying fees and who should be refunded (if found guilty), and 2) the type of fees it has been charging.

Its initial legal advice concludes that the NCR has no basis for the charge, Mr Price states, and it will make an application by Thursday (8 June) to oppose proposed sanctions.

Mr Price credit sales account for 55% of its total sales.


TFG also has various club memberships on offer for account holders, which give them several benefits such as insurance, discounts, access to special deals, etc. and they can also subscribe to 15 members-only magazines.

TFG is also involved in a dispute with the DTI and National Credit Regulator about the new affordability regulations when granting credit. Its date at the Cape Town High Court is on 7 August.

The National Credit Regulator launched investigations to check whether the industry was in compliance with the more stringent regulations about affordability assessments before granting credit and other changes in the National Credit Amendment Act, after they came into legal force in September 2015. This was in order to address the high level of consumer indebtedness that was causing concern.