South Africa’s biggest non-food retailer has been found
guilty of charging hundreds of thousands, if not millions of its
account-holders an illegal fee.
South Africa’s biggest non-food retailer has been found guilty of charging hundreds of thousands, if not millions of its account-holders an illegal fee.
The National Consumer Tribunal has ruled that Edcon’s
charging of a club fee on its credit agreements for the past 10 years
contravenes the National Credit Act.
The National Credit Regulator, which referred the case to
the Tribunal for a ruling, put out a statement yesterday saying that the
Tribunal intends to convene a hearing to determine the “administrative fine”
payable by Edcon.
And this: “The NCR will approach Edcon to request an
independent audit of their loan book to establish the number of consumers to be
refunded and the total amount to be refunded from 2007 to date.”
Clearly it’s a lot of money. Just how much I couldn’t
establish, because Edcon’s spokesman wouldn't tell me how many of Edcon’s 3,4
million accountholders have been paying a club fee. And obviously I have no way
of knowing how long that undisclosed number of people have been paying that
According to Edcon’s 2016 financial report, the company
has about 3,4 million accountholders. Working on the conservative assumption
that only half of those are paying monthly club fees of between R34 and R60 -
depending on the benefit level - the company earns close to R75million a month
in club fees.
And someone who has been paying a R44 club fee for all of
those 10 years would have paid a total of R5280 - but that fee would’ve been
less 10 years ago, so the total would be a bit less, but still running into the
An Edcon spokesman told me that the company intends to
appeal the order, so club members shouldn’t hold their breath about getting all
their fee payments refunded any time soon.
“This judgement relates to the merits of the issue, and
does not deal with any sanction, which will only be determined at a later
date,” he said.
It was only the club fee which was “under contention” not
the club product or membership, he said.
As for what that club fee buys members: there are three
tiers of club membership - Club Classic at R34 per month, Club Life at R44 and
Club VIP at R60 a month, with benefits including preferential rates and savings
on gyms and spas; movie and theatre tickets; accommodation and car rental and
emergency services, as well as education benefits.
I asked that Edcon spokesman what percentage of Edcon’s
club members actively claim those benefits on a regular basis, but he dodged
that question and said: “Edcon estimates that a Club member can save up to R17
000 over a year if all the benefits are used on a regular basis”.
The key word in that sentence is “can”.
I spoke to quite a few Club members yesterday said they never claimed any benefits and hadn’t realised that they needed a club card in order to do so.
And several accountholders have complained to me in
recent years that they acquired club membership and were charged a fee for it
despite not agreeing to it when applying for an account or when cold-called
with an offer to join the club.
So while the refund issue remains in the air, the publicity around this case will at least alert accountholders to the fact that they may be paying between R34 and R60 a month for club membership that they aren’t deriving any real benefit from, or don’t even know about.
Oh, and that the fee has been found to be illegal.
Edcon will no doubt continue to add that club fee to its
club members’ accounts pending its
appeal of the Tribunal ruling. At least to those who have haven’t cancelled
To be continued…
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