SAFPS: Who holds the purse strings?

NCR responds to uSpiked

Fraud is at the root of nearly all financial crimes and must be fought by all possible means. Every effort, regardless of who initiates it, aimed at combating white-collar crimes must be supported. However, when a seemingly-great initiative like the South African Fraud Prevention Services is used and abused by those in financial power simply to suppress and control, we are obliged to take a stand. As we continue to unpack the roots of Global Greed, the response from the Office of the National Credit Regulator has provided more questions than answers. SAFPS is now a registered Credit Bureau (NCRCB20), a registration that should clearly not have been allowed due to its contravention of Section 43 of the National Credit Act. But as we have seen, banks create their own laws and regulators have to abide by them. Here is the full response…

In Brief

  • The National Credit Regulator says the South African Fraud Prevention Services (SAFPS) – an organization founded by major players in the banking and financial services industry – met all the requirements to register and act as a credit bureau, but failed to seek registration as one
  • Regulator further saw no conflict of interest in members of SAFPS sponsored by the banks holding executive roles in the respective institutions
  • SAFPS goodwill is under the microscope as more disgruntled consumers emerge amid claims of malice

There are no clear measures for corruption. Even anti-corruption group, Transparency International, can only provide us with a Corruption-Perception Index. The office of the National Credit Regulator finds itself between a rock and a hard place and it clearly needs all the help it can get. The quick response to media queries is remarkable, but the difficulties that NCR personnel are exposed to cannot be lost. The only consumer watchdog against errant credit providers is rapidly finding itself running out of breath.

uSpiked: Unless the law was amended without the public’s knowledge, we fail to understand how SAFPS managed to get registered as a Credit Bureau despite the listed directors of the organisation being executives of various Credit Providers, which is contrary to Section 43 of the NCA.

NCR: By way of background information, SAFPS did not wish to register as a credit bureau in terms of the National Credit Act on the basis that their business model did not fall within the ambit of the Act. The NCR referred SAFPS to the National Consumer Tribunal for an order to cease operating as credit bureau or to register as one. The Tribunal found that SAFPS did not have to register as a credit bureau. [We already know that…] The NCR took the Tribunal’s decision on appeal in the North Gauteng High Court as per case number 58190/2010. The court set aside the decision of the Tribunal and:

  • Declared the activities of SAFPS to be in contravention of section 43 of the National Credit Act
  • Directed SAFPS to lodge an application for registration as a credit bureau as envisaged by section 43, failing which SAFPS must cease its operations in so far as it relates to information or reports received by it from credit providers.

The SAFPS, in line with the Tribunal order, applied for registration. [Actually it must have been on the basis of the High Court Order as the Tribunal had found otherwise]

The application for registration was handled in line with the requirements of the National Credit Act. In addition, a firm of independent auditors conducted a due diligence review as part of the registration process, as is standard procedure for all credit bureau applications. The issue of potential conflict of interest was addressed as part of the process and the conclusion reached was that the risk was mitigated by the fact that all the directors were non-executive directors. They were not involved in the day-to-day running of the SAFPS nor did any of them have a controlling interest in their own capacity in either SAFPS or the credit providers by whom they were employed.

uSpiked: We would also like to know what regulatory powers the Office of the Regulator has in ensuring that individuals (consumers) are not arbitrarily listed by SAFPS to settle vindictive scores they could have had with the member credit providers.

NCR: Consumers can exercise their rights in terms of section 72(1) (c) of the NCA to challenge any credit information held on them by the registered credit bureau. All the registered credit bureaus have to comply with this provision.

Furthermore, in the event of non-compliance, the National Credit Act permits the NCR to issue compliance notices or refer matters to the National Consumer Tribunal for appropriate relief such as suspension or cancellation of registration, imposition of fines, interdicting any prohibited conduct, etc.

uSpiked: What steps would the Regulator put in place to ensure that SAFPS fully complies with the NCA, or could it be that certain Credit Providers are allowed to create their own rules and laws?

NCR: All the registered credit bureaus are subject to a compliance framework enabled by the National Credit Act to ensure full compliance.

In addition, SAFPS like all registrants has been issued with conditions of registration which must be complied with. Contravention of these conditions may result in enforcement action being taken by the NCR.

[In the light of the responses above, we re-examined the cases from consumers involving SAFPS, and it is clear that the NCR needs more help.]

System ErrorTo start with, South Africa’s premier consumer website hellopeter shows at least four people who have found themselves listed by SAFPS without any due process. While talking of Section 72(1)(c), the Regulator should have continued to (d), which addresses the possible compensation for those who erroneously get listed by member-credit providers of the SAFPS.

Section 72(1)(d): Every person (consumer) has a right to … be compensated by any person who reported incorrect information to a registered credit bureau or to the National Credit Register for the cost of correcting that information.

This would indeed be costly for the banks in the case of Nav Chan, who has lost plenty since his listing with SAFPS. We also know that Chan and several other consumers filed their complaints with the NCR in respect of adverse listing by SAFPS nearly a year ago and the Regulator has yet to adjudicate.

Talking to Alec Hogg of BizNews, the Executive Director of SAFPS employed PR-101 for live interviews: ‘if you don’t want to respond to a particular question, ask your own and respond to it instead’. Due to limited airtime, the thinking goes, the interviewer will most likely not revisit the unanswered question. 

ALEC HOGG: So who would access that database? Who would have access to it?

CAROL McLOUGHLIN: You mean the companies… Once they’ve picked up an incident of fraud and they can identify the perpetrator, that individual’s information is listed onto the database.

[Hogg was referring to their secret benefactors who have provided the non-executive directorships to the organisation. But instead McLoughlin created her own question on how individuals get listed onto their data-base]

ALEC HOGG: Do they have to have a criminal record?

CAROL McLOUGHLIN: No, it doesn’t have to go through the court as long as the evidence that they have on record is sufficiently credible and proves the actual incident that took place.

Returning to the response we got, we have submitted follow-up items of concern that we expect the Regulator to clarify:

We have sought the identification of the claimed independent auditors who examined the SAFPS application and provided them with the illegal waiver. We have also pointed out the claimed non-executive roles being played by the directors provided by the members who founded the organisation. While the Regulator contends that the independent auditors checked on possible conflict of interest and proceeded to clear them based on their non-involvement with the day-to-day running of the organisation, we all know the powers of non-executive board members of most organisations (public or private).We have definite instances where non-executive directors of listed companies call on the executives of their entities to do things in certain ways.

This matter is far from over. African Bank Investments Limited, currently under curatorship of its administration, is still represented on the board of SAFPS by Erich Schenk… we wonder whether he has been listed in the same database, as a risky individual with whom to do or not to do business.

As the plot thickens, we haven't revealed yet the protection mechanism FNB appears to provide to certain multinationals threatened by Chan's bio-diesel conversion techniques. FNB, how can we trust you?