The National Credit Act (NCA) sets out the maximum service fees allowed in credit agreements. The supreme court of appeal in Barko Financial Services v National Credit Regulator confirmed the National Consumer Tribunal’s power to order reimbursement by credit providers to consumers for service fees paid in excess of the statutory limits.

The extra fee related to payment to the payment service provider (NuPay). Barko Financial Services unsuccessfully argued that the consumer had concluded a separate agreement with NuPay. The court determined from the substance of the agreement that NuPay’s entitlement to a fee arose from the relationship between NuPay and the credit provider. The credit provider sought to pass its obligation to NuPay on to the consumer by way of a separate agreement, purportedly between NuPay and the consumer. The service provider fee was collected as part of the credit payment obligation of the consumer in one transaction, allegedly in order to save bank charges.

In substance the credit provider entered into an agreement with the consumer in which the consumer authorised the fee payable to NuPay to be met from the consumer’s bank account. The argument by the credit provider that there was an entirely separate transaction between NuPay and the consumer was held to be untenable.

Even if the agreement was between the consumer and NuPay, the court held that the credit provider is not entitled to induce a consumer to enter into a supplementary agreement that would be unlawful if it were included in the credit agreement (section 91(a) of the NCA).

The ordinary meaning of the word ‘induce’ was used in interpretation. Barko Financial Services presented the agreement to the consumer as part of a suite of agreements to persuade the consumer that it was in their best interests to sign that agreement. It is inconceivable that the credit provider would adopt a neutral stance with regard to its preference of payment method. The fact that the consumer was free to decline to conclude the agreement is irrelevant to the question of whether or not they were induced to do so.

The transaction processing fee was charged for the same services encompassed in the service fee in the credit agreement. Using two agreements does not make lawful what would have been unlawful in terms of one agreement.

The court confirmed that the National Consumer Tribunal is empowered to order repayment to the consumer of any excess amount charged, together with interest at the rate set out in the agreement. If an unlawful fee is charged, it follows logically that matters must be set right by repayment of the relevant amounts. In the court’s view, it would be astonishing if the Tribunal could not make such an order for repayment in circumstances where unlawful excess charges are found, because the Tribunal is the protector of consumers in credit transactions.