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Business Practices Committee Report 78

Interest Recalculators

6. Conclusion



6.1 Harmful business practices


An individual calculator glaringly misled potential clients when it purported to be an auditor. ("This lady stated that they are not an interest recalculation company, instead they are forensic auditors".) The other complaints which were received from consumers against recalculators clearly indicate common factors in their deception. This deception came about because facts were deliberately withheld from, and lies told, to prospective clients. Most, if not all clients of recalculators, were inter alia led to believe that:


a) banks, as a matter of policy, deliberately overcharge their clients interest whenever possible, for example:


"He stated that my bank is one of the biggest culprits and that he could virtually guarantee that I would get a refund from the bank" and


An interest recalculator gave a written and useless guarantee stating "... you could expect a minimum claim of R10 000 on the above claim. This figure depends on the final calculation which would include ‘moratore’ (sic) interest, which would mean that the final claim could be more that the amount mentioned".


"She showed me a file containing a list of people and companies who had received large refunds due to incorrect interest calculations by the banks, and also the bank where my account was held".


The fact is that there is no evidence to support this allegation. The Committee did not receive any submissions from recalculators to substantiate this allegation.


b) the investigation and receipt of the "overcharged" interest would be concluded after a few months.


The fact is that the Committee received no submissions from recalculators or their clients that an investigation and receipt of the "overcharged" interest were concluded after "... a few months". Furthermore, banks apparently seldom agree with the calculations of recalculators and are prepared, in most cases, to take the matter to the courts. This procedure is expensive and time consuming. This information was withheld from prospective clients.


c) it would be easy to obtain the required banks statements for the periods that the clients required the interest to be recalculated.


The fact is that the banks’ statements were either not forthcoming or the banks, for various reasons, took a considerable time in supplying the required information. This was not conveyed to the prospective clients. The allegation was made by an interest recalculator that some banks charged excessive fees for bank statements. The prospective clients only became aware of these practical problems after they signed the contracts and the recalculators banked their monies.


After signing the contracts:


a) Calculations were delayed by recalculators or perhaps did not take place at all. A convenient escape from irate clients was to blame the banks for not making available the required bank statements. In other cases recalculators engaged in regular meaningless correspondence as a delaying tactic. The complainant who wrote: "The intentions of these people are clear. Play for time and in the end both parties simply forget about the contract" was probably correct.


b) Clients were sent for pillar to post after they paid in advance for services to be rendered. "I have tried on numerous occasions to contact them but there was no reply", "No contact since I paid them", "To date I have never heard from them again" and "They simply do not respond to telephone messages".


c) Some recalculators simply "disappeared", only to surface at a later stage under new trading names. "I was told that they had suddenly vacated their offices and there was no forwarding contact number or address" and "Since the day of signing the contract they have changed address and telephone number at least once without notifying me".


d) The guarantees of some recalculators were worthless. "The only mistake they have found is R7.48. They have guaranteed to refund my money if they are unable to claim it from the bank. I have paid an upfront fee of R5 880. The only reply I got from them is that they have not reached a consensus with the bank since November 1998" and "I was told that it was not a problem because with the ‘money-back guarantee’. I would in any case get my money back should it not be possible to do the investigation".


6.2 The rights of consumers


In a brochure issued by the Department of Trade and Industry (13) it is stated that there are eight internationally recognised consumer rights. There are the right to: satisfaction of basic needs, safety, information, choice, representation, redress, consumer education and a healthy environment. Two of these consumer rights, within the context of interest recalculators, are discussed briefly, namely, to choose and to be informed.


Consumers, however, do not only have rights. They have the responsibility to be more alert and questioning about the price, quality and safety of products and services (14) they buy. Before making any buying decisions, it is necessary for consumers to obtain information on products and services and they should also ask about the terms and conditions of contracts. Many complaints could be avoided if consumers assumed this responsibility. There are cases, however, where consumers are not in a position to exercise their responsibilities because they are unfamiliar with the products or services. In such cases it is the responsibility of the supplier of the product or services to fully inform the consumer.


6.2.1 The right to choose


The Consumer Affairs Committee’s sole function is to afford some protection to consumers from exploitation in the form of harmful business practices by undertaking investigations into such practices and recommending to the Minister that he prohibits or regulates such practices. Protecting consumers by a total ban on recalculators would he inappropriate. There probably are recalculators who render acceptable services. A total ban would deprive the consumers of their right to choose. This right of consumers to choose is based on the assumption that they are provided with the facts and make informed decisions to purchase the services of recalculators.


6.2.2 The right to be informed


Many consumers reasonably assume that recalculators are capable and will provide the services they sell. Consumers are uninformed and prejudiced when, first, recalculators fail to disclose to them that they (the interest calculators) are not always capable, even through no fault of their own, to provide the services promised. The effect on consumers of this non-disclosure is that they are misled into believing that they enjoy the commercial and contractual support of the interest recalculator. Consumers’ expectations may then be disappointed when the services are not rendered, even though services of comparable quality may be available.


No seller of products or services may make any misrepresentation to a prospective purchaser, either expressly or by implication. No sincere entrepreneur could argue the opposite No moral recalculator could object should the Minister introduce measures to ensure that consumers are informed about the facts in the recalculation industry. Such misrepresentations would include purporting to be able to deliver a service if this were not the case. The purchase habits of consumers are such that the mere prospect of refunds from their banks is often sufficient enough to create an impression that the recalculator could supply the service. To ensure that any such possible misunderstanding is timeously corrected. it is incumbent upon the supplier to inform consumers that they (the consumers) would perhaps not obtain the services pad for.


All the evidence at the disposal of the Committee points to the undeniable fact that the clients of recalculators have in the past been misled, whether on purpose or by accident. There is also evidence that shows that clients have at times been misled by design. This is obviously not in the public interest. It is a harmful business practice not to inform the buyers of recalculation services or buyers of computer software packages which is specifically programmed to calculate fees, charges, and/or interest charged on any debtor’s account(s), including accounts held at financial institutions, about the facts regarding recalculations and claims against financial institutions such as banks.


The Committee is consequently of the opinion that consumers have the right to be informed by recalculators of the problems that could be encountered in a "recalculation". The Committee regards it as the responsibility of recalculators to ensure that their clients are explicitly informed of the conditions attached to the recalculation prior to the clients paying for the service.



13) National consumer Affairs Office, "Your Rights as a consumer!".
14) National Consumer Affairs Office, "Know Your Responsibilities as a Consumer".