IN THE NATIONAL CONSUMER TRIBUNAL

HELD IN DURBAN

Case Number: NCT/90452/2017/141{1)

In the matter between

JAMIE WHITSON

and

FIRST NATIONAL BANK A DIVISION OF FIRSTRAND BANK LIMITED

Coram:

Prof Tanya Waker- Presiding member

Prof B Dumisa

MrT Bailey

Date of hearing - 28 May 2018

THE PARTIES

APPLICATION FOR LEAVE TO REFER

JUDGMENT AND REASONS

APPLICANT

RESPONDENT

1. The Applicant is Jamie Whitson (hereinafter referred to as "the Applicant"), a consumer who lodged a

complaint with the Ombudsman for Banking Services and the National Credit Regulator (the NCR), in

terms of the National Credit Act, 2005 (NCA) regarding the conduct of the Respondent.

2. The Respondent is First National Bank (FNB) a Division of First Rand Bank Limited situated at FNB

Place, 30 Diagonal Street, Johannesburg, a registered credit provider with the NCR with Registration

Number NCRCP 20.

APPLICATION

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Jamie Whitson and FNB a division of Firslrand Bank Limited NCT/90452/2017/141(1)

3. The application brought before the Tribunal is in terms of section 141 (1) of the NCA. The Applicant

received a notice of non-referral in response to the complaint that he lodged with the NCR. The Applicant

is now applying for leave from the Tribunal for the complaint to be referred directly to the Tribunal.

4. In accordance with section 141 (1 ), only the application for leave is being considered at this stage by the

Tribunal.

5. This judgment follows a consideration of the documents fried of record as well as arguments presented

by both counsel for the parties at the hearing held in Durban on 28 May 2018. The Applicant was

represented by Ms Toni Palmer (instructed by Preston Whyte and Associates} and the Respondent was

represented by Ms Annemarie Friedman (instructed by Glover Kannieappan Incorporated).

BACKGROUND

6. The Applicant has a transactional account with a linked overdraft credit facility account with the

Respondent.

7. In 2014 the Applicant applied for an increase in his overdraft credit facility which was granted in the

amount of R72 300.00. There are no allegations of reckless credit lending regarding the granting of this

credit facility.

8. During January 2016, the Applicant purchased a lotto ticket from Lotto Leader through a website called

www.lottoleader.com. Lotto Leader is an internet gambling organisation. In order to purchase the ticket,

the Applicant supplied Lotto Leader with his credit card details and this credit card was used to purchase

the lotto ticket.

9. In March 2016, eight further purchases for lotto tickets from Lotto Leader were made using the same

credit card number. In total R67 206.52 was debited from the Applicant's account and the result was that

the Applicant's FNB transactional account was R42 834.52 in overdraft.

10. The Applicant states that he was not responsible for purchasing the eight lotto tickets and that he

immediately contacted the Respondent and informed it of this fact. This is not disputed by the

Respondent.

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11. The Applicant then submitted a Cheque and Credit Card Dispute Form to the Respondent and on 4 April

2016, the Respondent commenced with investigating the dispute between the Applicant and Lotto

Leader. On 5 May 2016, the Respondent provided the Applicant with temporary credits in respect of the

disputed amounts.

12. The Respondent alleges that at all times the Applicant was aware that these were temporary credits

which depended on the outcome of the dispute. The Applicant signed the Dispute Form that

acknowledged that he remained responsible for the transactions if Lotto Leader supplied evidence that he

participated in the transactions. His account would then be re-debited. This is not disputed by the

Applicant.

13. On 6 May 2016, the Applicant made an internet payment in the amount of R52 000 and on 9 May the

Applicant made a payment from his cheque (overdraft) account to his credit card in the amount of

R28 000.

14. On 9 June 2016 Lotto Leader provided the Respondent with a copy of a declaration which it alleges was

signed by the Applicant and dated 29 March 2016 in terms of which the Applicant confirmed that he

authorised and approved payment of the amount of 3750 euros which translated into R67 206.52.

15. The Applicant vigorously disputes that the document is a legitimate document and alleges that his

signature on the document is a forgery. He even went so far as to have his signature assessed by a

handwriting expert. The Applicant states that he "spent many hours calling and emailing various contacts

at the Respondent trying to ensure that someone would have proper regard to his complaint that a fraud

had been committed". He states that he also drew the Respondent's attention to the fact that he

subsequently discovered that Lotto Leader is a dubious organisation that has a reputation for conducting

fraudulent schemes.

16. Despite appeals by the Applicant, that the Respondent not to accept Lotto Leader's documentation, the

Respondent informed the Applicant that, based on the documentation that had been received from Lotto

Leader, the relevant debits would be processed from his account.

17. The Respondent then re-debited the Applicant's account and the result was that the Applicant's overdraft

amounted to R132 554.42.

~6. In the papers before the Tribunal, the Applicant alleges that the Respondent:

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(1) Acted negligently in that it failed to take reasonable steps to verify his signature and safeguard

his account from fraud after he had warned them of this fact; and

(2) Engaged in reckless lending when it re-debited his account because the result was that he

had exceeded his credit limit.

19. In the answering affidavit, the Respondent argues that it cannot confirm nor deny or comment on the

Applicant's allegations which he had made about the document submitted by Lotto Leader or about the

fraudulent nature of Lotto Leader's conduct.

20. The Respondent further argues that it adhered to the process laid out in the VISA chargeback rules and

regulations. Lotto Leader furnished proof that the Applicant participated in the transactions and the

Applicant's account was re-debited accordingly as he was liable for the transactions. The Applicant's

dispute is therefore with Lotto Leader and not with the Respondent.

21. The Respondent further argues that the Applicant was aware that he could be held liable for the

transactions but that he had nevertheless proceeded to use the available funds of the cheque account

and overdraft facility.

22. The Applicant referred a complaint to the Ombudsman for Banking Services. The ombud concluded that

because Lotto Leader had supplied a signed agreement "agreeing for a total amount of 3750 EUR" there

was no legal basis on which to compel the bank to refund the Applicant for the transactions. The

Respondent followed the required chargeback procedure and Lotto Leader then provided proof of the

mandate. This is a dispute between the Applicant and Lotto Leader that does not involve the

Respondent. The ombud also stated that it could not perform a forensic analysis in order to establish

whether the signature on the document is the Applicant's signature.

23. The Applicant then referred the complaint to the NCR. The NCR concluded that the Respondent had not

contravened the NCA and issued a notice of non-referral dated 18 August 2017, hence this application for

leave to refer the matter directly to the Tribunal.

THE HEARING

24. The hearing was held on 28 May 2018. As stated above, the issue before the Tribunal is whether it

should grant leave for the matter to be referred as provided for in section 141 (1) b).

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25. The Tribunal established in terms of the NCA is a creature of statute and does not have inherent

jurisdiction to deal with all disputes between consumers and credit providers. The Tribunal's jurisdiction

relates particularly to prohibited conduct and therefore it is necessary for the Tribunal to establish whether

the Respondent's conduct as far as the Applicant is concerned constitutes prohibited conduct under the

NCA. It is only if it is established that the Respondent engaged in prohibited conduct, that the matter can

be referred to the Tribunal.

Applicant's case

26. At the hearing the Applicant's counsel, Ms Palmer, modified the Applicant's arguments slightly and

explained that at the time the Applicant had drafted his founding papers and his replying affidavit he was

not legally represented.

27. The Applicant concedes (correctly in the Tribunal's view) that the Tribunal has no jurisdiction to deal with

the issue of the Respondent's negligence in the manner in which it dealt with the Applicant's complaint.

Nevertheless, the Applicant argues that the Respondent engaged in reckless lending and therefore the

matter fell within the ambit of the NCA (as provided for in section 80). Therefore, the Applicant argues,

the Tribunal has jurisdiction to deal with the complaint and the matter must be referred for a full hearing

into the merits.

28. The Applicant argues that the reckless lending occurred when the Respondent paid the disputed amounts

back into the Applicant's account on 5 May 2016 thereby giving him access to further credit. It was

unsurprising that the Applicant should make use of this extra credit and when the Respondent re-debited

his account at a later stage he then became over-indebted. Had the Respondent not credited his account

with the disputed amounts he would not have had access to these funds and he would not have found

himself over-indebted when the Respondent re-debited his account in September 2016.

29. In reply to a question from the Tribunal regarding the issue of interest that the Applicant would have been

required to pay on the disputed amount, had the Respondent not credited the Applicant's account, the

Applicant argues that this is a separate issue which has no bearing on whether or not the Respondent

engaged in reckless credit lending.

30. The Applicant submits that when the Respondent provided the Applicant with a charge back on 5 May

2016 it was in fact increasing his credit limit. He was in effect getting access to R67 000 more credit than

he was entitled to. Access to this credit caused him to become over-indebted at the time when the

Respondent re-debited his account.

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31. The Applicant argued that the Respondent. in failing to conduct an assessment in order to establish

whether the Applicant could afford the extra credit, engaged in reckless lending as provided for in section

80. Further, the fact that it may have acted correctly according to the Visa charge back rules is irrelevant

because it was contravening South African legislation that had been introduced to protect consumers

even, at times, from themselves.

The Respondent's case

32. The Respondent argues that it did not provide an extension of credit to the Applicant; it merely paid a

debt that it established the Applicant owed.

33. Section 80 provides that a credit agreement is reckless if, at the time when the credit agreement was

made or at the time when the amount approved is increased, the credit provider fails to conduct an

affordability assessment as required by section 81 (2) of the NCA.

34. The Respondent submits that when the amounts were for the first time debited (on 29 March 2016) to the

Applicant's overdraft facility, the established credit limit was not exceeded. The approved credit limit was

R72 300 and the debt amount after the debits was R42 834.52. Therefore, the credit was not extended

recklessly at the time when the Respondent debited the amounts to the Applicant's credit facility.

35. The Respondent argues that a debt was created the first time the Applicant's account was debited. The

refund was only temporary pending an investigation into the Applicant's allegation of fraud. At the time

when the debt was re-debited credit was not advanced. It was payment of an existing debt. At that stage

it would not have made sense to conduct an affordability assessment because the Applicant owed the

money and the debt had to be repaid.

THE LAW APPLICABLE TO THE APPLICATION

36. As stated above, the Tribunal is merely assessing whether the Applicant has made out a case that should

be considered by the Tribunal.

37. In determining whether the Applicant should be granted leave to refer the matter to the Tribunal, the

Tribunal must consider the requirements for the granting of "leave". A similar application can be found in

the High Court practice, where an Applicant applies for leave to appeal a judgment. It was held in the

Westinghouse Brake and Equipment (Ply) Ltd - matter, as cited above, that -Page 6 of 9

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"in applications for leave to appeal properly brought before the appropriate court in terms of the old

sec 20, read with sec 21 as it then was, the only relevant criteria were whether the applicant had

reasonable prospects of success on appeal and whether or not the case was of substantial importance

to the applicant or to both him and the respondent. •

38. The Tribunal, when considering whether to grant the Applicant leave to refer or not, uses the same test

as applied in the High Court for applications for "leave" .. 1

39. The Tribunal will therefore consider the following factors:

(1) whether the matter is of substantial importance to the Applicant;

(2) the Applicant's reasonable prospects of success with the referral.

40. Based on the lengths the Applicant has gone to lodge a complaint with the Respondent regarding

possible fraud, and a complaint about the Respondent's conduct with the Ombudsman for Banking

Services, the NCR and ultimately the Tribunal and the value of the claim, it is clear that the matter is of

substantial importance to the Applicant. There is no doubt that on the Applicant's version of events he

has a grievance against Lotto Leader and may well have an issue regarding the manner in which the

Respondent dealt with his complaint. He went to great lengths to try to convince the Respondent that

he had been defrauded.

41. The second question, as to the reasonable prospects of success must be answered by considering

whether the substance of the Applicant's complaint falls within the ambit of the NGA without deciding on

the merits of the matter. The crisp issue that the Tribunal must consider is whether the Respondent's

conduct in re-crediting the Applicant's account amounted to reckless credit as provided for in section 80.

42. The Applicant has argued that when the Respondent paid the disputed amounts back into the

Applicant's account the effective result was that he was given access to further credit and that as a

consumer it is unsurprising that he made use of the extra credit. Therefore, it was at the time when the

money was paid back into the Applicant's account, that the Respondent engaged in reckless credit

lending and it should have conducted an affordability assessment to ensure that he (the Applicant) could

repay the extra credit that had been extended to him. Failure to conduct an assessment at that time

constituted reckless tending. The legislation has been introduced specifically to protect consumers from

1 This issue has also been considered by the Tribunal in a number of other decisions , see for example, MV Chauke v Standard Bank et al NCT/4658/2012/141(1)(P), and Coertze and Burger v Young NCTI/7142/2012/73(3)&75(1)(b) CPA and Esther Rhulani Tshwale (obo True Harvest College) v Faitzan Properties NCT/12505/2014/75(1)(b) & (2) CPA.

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themselves. Therefore even if a consumer engages in improper conduct (by for example removing

funds from his account) this does not excuse the Respondent's reckless lending.

43. After considering all the arguments presented by the parties, the Tribunal concludes that it cannot

accept the argument of the Applicant that the Respondent engaged in reckless credit lending when it

temporarily credited the Applicant's account. To accept this argument would lead to an absurd result.

Every time there is a dispute between a consumer and credit lender, the credit lender would refuse to

refund the consumer the disputed amount whilst the matter was under investigation because this could

be construed as reckless lending.

44. Rather, the Tribunal finds that the Applicant's complaint is about fraudulent conduct that resulted in his

account being debited unlawfully. His true complaint against the Respondent is that the Respondent

refused to accept his version of events and insisted on debiting his account even though he had

produced credible evidence that a fraud had been committed. The Applicant has bought his complaint

within the defines of reckless credit in order to seek the help of the Tribunal in resolving this dispute.

This is perhaps understandable because it is so much easier and less expensive to bring matters to the

Tribunal than the civil courts. Unfortunately, however the Tribunal only has jurisdiction to deal with

certain matters and to find that the conduct of the Respondent in this particular case, amounted to

reckless credit lending is to stretch the matter beyond what the legislature intended. This dispute is

about a possible fraud that cannot be adjudicated upon by the Tribunal; it is a matter for the civil courts.

45. Regardless of whether or not the Respondent should have adhered to the Applicant's pleas not to re­

debit his account, the Tribunal concludes that by doing so the Respondent did not engage in reckless

credit as prohibited by section 80 of the NCA. The Tribunal concludes that the NCR was correct in

concluding that the matter does not fall within the ambit of the NCA.

CONCLUSION

46. The Tribunal finds that the Applicant has not satisfied the requirements for the granting of leave in terms

of Section 141 (1) of the NCA.

ORDER

47. Accordingly, the Tribunal makes the following order:

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(1) The application for leave from the Tribunal is refused.

(2) No order is made as to costs

DATED 8 June 2018

signed)

Prof T Woker

Presiding Member

Authorised for Issue by Natlonaf Consumer Tribunal

Caso ~~umber Af C; 0 ~~r......l..:::.=l.~'f-.:.~!./-~~

f·blionll Consumer Trtbunal Ground Floor, Building B l.a~c ;icld Otr.ce Park 2i2 West Avenue, Cent11rfon, 0157 n;itlon,11 consumer tribunal www.thcnct.co.z:i

Prof B Dumisa (Tribunal Member) and Mr T Bailey (Tribunal Member} concurring.

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