The South African Reserve Bank has written to the National Credit Regulator requesting a probe into loan-origination fees charged by Capitec Bank Holdings Ltd., according to a person familiar with the matter.
The referral came after the issue was raised in a report by short-seller Viceroy Research in January, said the person, asking not to be identified because the matter is private. The investigation is ongoing, the person said. Capitec Chief Financial Officer Andre du Plessis said he was unaware of the central bank’s referral, or of an investigation by the Johannesburg-based NCR.
Capitec shares dropped as much as 4.3 percent and were trading down 1.9 percent at 870.89 rand at 9:05 a.m. in Johannesburg. The stock has declined 21 percent so far this year, more than any other lender in the six-member FTSE/JSE Africa Banks Index, which is down 5.3 percent.
In the January report, Viceroy said Capitec boosted its income by charging excessive fees on its multi-loan product, which carried a monthly charge for allowing a previously vetted customers to extend their facility by answering some questions. While Capitec said it terminated the product in 2016, after rules introduced by the NCR meant it was no longer viable, Viceroy said that the lender rebranded it and that Capitec’s methods risk over-indebting consumers.
Capitec denied this, saying Viceroy did not understand the product or how its processes work. The NCR had previously probed the multi-loan facility and was satisfied with the fees and interest charged, Capitec said on Feb. 8.
Both the Johannesburg-based NCR and Pretoria-based central bank declined to comment.
The central bank monitors lenders for their compliance with rules ranging from their operations and capital levels to staffing and money laundering, with the ability to fine companies or revoke their licenses. The NCR can also administer financial penalties on lenders which violate the National Credit Act, legislation aimed at protecting consumers from becoming over-indebted.
Officials from the central bank and the NCR told lawmakers in March that many of the allegations made by Viceroy were not new and that not all of them were accurate.
“The Reserve Bank is very active in doing ongoing reviews at all the banks,” said Du Plessis, speaking more broadly on the regulator’s oversight. “If anything bothers them, they actually contact us or ask that we report on something. That happens on an ongoing basis.”
On Friday, Capitec announced it had reached an agreement with Summit Financial Partners, which was challenging the lender in court and before the NCR on behalf of six complainants. The cases, which mostly centered on Capitec’s now defunct multi-loan facility, were withdrawn.