Reg Rumney
When is insurance not insurance? When it is offered by a company not registered as an insurer, of course.
The Department of Trade and Industry (DTI), in its 1994 annual report, states that it has submitted to an attorney general (AG) for possible further action the case of a furniture company which has taken in from customers illegal premiums or insurance payments worth R20-million.
Director of trade regulation and credit protection John Rosin says the retailer actually received R30-million. The R20-million is the net figure after paying out R10-million. He will not name the retailer, because the matter is still with the AG. The investigation was done in terms of the Usury Act, by the Usury Inspectorate.
The insurance offered is illegal because the company is not registered as an insurer.
The same problem raises its head with payments for mechanical breakdown warranties: they should be paid to an underwriter, not the company collecting the premiums, says
This is not to say some retailers and traders are acting legally, by collecting premiums on behalf of an insurer. The DTI report, though, seems to show the attraction of a lucrative extra source of income has led many firms astray.
The report says offences committed in terms of the Usury Act were mostly the receipt of illegal fees, excess finance charges and credit life insurance premiums and premiums for mechanical breakdown warranties.
Illegal premiums for mechanical breakdown warranties could run to millions of rand, says the report.
Investigation of charging of excess finance charges is fairly straightfoward. Naturally, charging more than the Usury Act allows — rates pretty high in inflation-adjusted terms anyway — is illegal. The maximum rates allowed are 28 percent on R6 000 or less and 25 percent on amounts above R6 000.
But the inspectorate also investigates the frequent attempts to get more than the rate by adding in other fees on top of interest charged.
Rosin explains that in terms of the Act the lender can only recover the principal debt and finance charges from the
The lender cannot add on “raising fees”, administration fees, documentation fees or any other fees.
The Usury Inspectorate carried out 18 inspections in 1994, states the Trade & Industry annual report. Thirteen reports have been sent to the various AGs.