Affected Consumers Will Be Refunded
After referring Monarch Insurance and Lewis Stores (Lewis Group) to the National Credit Tribunal (NCT) for dishonest insurance sales to vulnerable consumers, the National Credit Regulator (NCR) has also requested that the company be slapped with a hefty fine of +/- R10 million. The regulator’s comprehensive internal investigation of Lewis Group began in June 2007, culminating in a public referral to the tribunal on 9 July, 2015.
In response, Lewis has declared it will be refunding wronged consumers a total of R23 million in interest and +/-R46 million in premiums. However, chief executive officer of Summit Financial Services, Clark Gardner pointed out, “The average refund must be about R1 000 rand… That’s 46 000 breaches. How’s that human error?”
Lewis Answers to NCR’s Claims
Lewis blames their unlawful retrenchment and disability insurance sales to pensioners, the disabled and the self-employed on human error. The company insists that staff members are at fault and not company policy. Moreover, it refutes the NCR’s claim that it had purposefully defrauded vulnerable consumers.
Determined to oppose the referral, last week, Lewis and Monarch filed their answering affidavit, challenging the regulator’s procedures. Curiously, in their affidavit, Lewis explained that they are of the opinion that selling this kind of insurance (especially disability cover) to pensioners is not in breach of the National Credit Act (NCA).
Lewis shares took a sharp nosedive after the NCR announced it would be referring the retailer to the NCT, losing +/-40% of their value, as investors became uneasy. The Lewis ‘scandal’ evoked memories of African Bank’s notorious fall from grace and ruinous curatorship. The director of Summit, David Woollam said of Lewis Group, “A greater proportion of the debtor’s book is poorly performing and is not adequately provided for…There is a gross misrepresentation of the financial statements.”
Making a Comeback
On Thursday, 13 August, the retailer’s shares sprang up by +/-11%, representing the biggest JSE climb of the day. Though, Friday saw shares backslide by 1.2%. Overall, it would appear that Lewis’ promise of a refund has settled investors’ nerves, despite the impending fine. Certainly, consumers, investors and politicians alike are bound to be satisfied with an outcome, where a wealthy, powerful corporation actually pays back the money they owe to vulnerable consumers, whom they’ve wronged.