Moneyline to be taken to Consumer Tribunal for reckless lending

Pharie Sefali
People queue for loans in Nyanga. Picture by Pharie Sefali.
Pharie Sefali

The National Credit Regulator has referred financial company Moneyline to the National Consumer Tribunal for reckless lending to recipients of child grants.

Media relations officer Lebogang Selibi told GroundUp her office had referred Moneyline to the Tribunal for contravening the National Credit Act, “specifically for extending monies recklessly to child grant recipients”.

Moneyline Financial Services is a subsidiary of NET1, the company that pays social grants on behalf of the South African Social Security Agency (SASSA).

The company operates a loan service from a church in Nyanga on weekdays.

When GroundUp visited on 3 August, hundreds of people were queuing to get a loan. Some had spent half the day waiting. They came from different parts of Nyanga and surroundings. Most of the people in the queue were old or disabled, but there were also younger people and mothers with children on their backs.

A Moneyline official told GroundUp that only applicants with an identity document, proof of address and a SASSA card were eligible for loans. Anyone who did not have those should step out of the queue, he said.

Yet the minister of Social Development Bathabile Dlamini warned last September that the department would take steps to prevent social grants being used as collateral for loans.

She also said that SASSA payment systems must be designed in such a way that social grant beneficiaries’ bank accounts were “off limits” to creditors. In addition, SASSA bank accounts and confidential information of grant recipients must be protected.

But a Moneyline official at the church told GroundUp that applicants’ names were checked “in the system” and if their names were there they immediately qualified.

Another official said the money was immediately transferred to applicants’ SASSA accounts and deductions started the following month. Asked if affordability checks were done, she said no, applicants only needed their SASSA cards.

A woman who had been standing in the queue since 6am said in Xhosa, “Ndaphangela ntombazana, andinasithukuthezi ngokuza apha ndifuna imali” (I am a working lady; I did not come here because I was bored; I need money).

It was the first week of the month, and she had received her grant money four days earlier. She had a job, she said, but she still needed a loan.

A woman known as Mamchawe said that she came every month for a loan. “I normally get a loan of less than R200 every month. My child gets R320 for her grant and with that money R200 is deducted from my account. So I will only have maybe R100 for groceries and school. So for me it is a must to come to the church every month; otherwise, we won’t survive”.

SASSA spokesperson Kgomoco Diseko said SASSA tried to discourage social grant beneficiaries from taking up loans using the grant as security.

“Money lending to grant beneficiaries actually works against the goal of fighting poverty,” he said. He said lending to grant beneficiaries drove them into a debt trap, where beneficiaries took out a new loan to repay an old one.

“Money should not be deducted from social grant accounts for any purpose other than funeral schemes, which should not cost over 10% of a specific grant,” said Diseko.

He also said that the new tender for social grants would make provision for curbing these deductions.

Elroy Paulus from the Black Sash, which has been running the ‘Hands Off Our Grants’ campaign, said the Social Assistance Act made it clear that social grants could not be transferred, ceded or encumbered in any way. “Therefore we are of the view that these loans are unlawfully granted,” he said.

He said the Black Sash agreed with Dlamini’s view that there was a “growing national phenomenon of unlawful and immoral debit deductions that is unacceptable”, and that these “remain immoral as they serve to rob the poor… “, and that the absence of risk and affordability checks as required by law … exacerbates their vulnerability and in turn drives borrowers into a vicious cycle of never ending debts”.

“Grants are meant for basic services,” said Paulus. “Companies should not enrich themselves at the cost of the poor and have SASSA beneficiaries beholden to them to live on loans as a result of grants.”

GroundUp asked Moneyline head office on Friday for comment, but the company has not yet responded.

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TOPICS:  Economy

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