When is a loan not a loan? Wendy investigates
Today’s story began in January, a time when many consumers find themselves with too little money to meet their commitments, way before January pay day.
By mid-January, John - not his real name - was facing a financial crisis. He was out of cash, and his lines of credit - credit card, overdraft, bond - were maxed out.
So he went online in search of a smallish, short-term loan to tide him and his family over until pay day.
He found a company going by the name of Loan Zone SA and clicked on the link which took him straight to an application form. He filled in his details, looked very briefly at the very wordy terms and conditions, and then submitted it.
Had he read those Ts and Cs properly, he would have seen that what he was doing was not applying for a loan, despite being lured by the words Loan Zone. What he was actually doing was agreeing to a one-year subscription to a telephonic advice SERVICE, at R399 for the first month and R99 for the remaining 11 months - a total of R1500.
By February the payment demands began - at first John thought there’d been a mistake; but then Loan Zone sent him the terms and conditions, which reveal the phone service subscription which John admits he was too desperate and in too much of a hurry to notice at the time.
“There’s no way I would knowingly agree to pay money every month for someone to give me legal advice telephonically - maybe - if I don’t have any money and I actually just need a couple of thousand rand to get through the month,” he said.
Is the company registered?
Those words have been echoed by dozens of others who have made the same mistake as John, involving similarly named companies advertising online - Loan Scout, Loan Connector, and Loan Tracer, among others, all registered companies owned by Lifestyle Direct of Century City.
The company is registered with the National Credit Regulator, but does not appear to be in the business of credit providing at all.
They provide what they call “convenient” services over the phone – including legal advice, motor vehicle accident claim advice service, and a personal injury assistance advice service – for that monthly fee. And as a free bonus they’ll “attempt” to secure their subscribers a loan.
And the subscription continues indefinitely until the consumer cancels in writing.
Yes, the terms and conditions do disclose the true nature of what they're agreeing to when they fill in that form. But they aren’t on the form itself - the consumer has actively seek out that key small print, and then read all of it.
And the fact that the company names all have the word “loan” in them, as opposed to “Phone Advice Service” is more than a little misleading.
'Consumer expected to study terms and conditions'
When payment for the “service” is not made, legal demands are made by Lifestyle Legal, part of the Lifestyle Direct Group.
When I engaged with Meagen Beelders of Lifestyle Legal recently, she said: “The consumer is expected to study the terms and conditions and make responsible and informed decisions as any reasonable consumer would”.
“The web pages alert the consumer to the services offered, and in no way misrepresents the consumer,” she said.
“Before submitting the application, the consumer is asked to tick a box to provide consent. Further below that, is the wording: ‘By ticking this box and submitting this application, you confirm that you have read the Terms of Service, Terms of Use, Legal Disclaimer and the Privacy Policy of Loan Scout SA and fully understand the contents … If you do not agree to the policies, do not submit this application’.
“From our point of view, if the consumer failed and/or was negligent in taking the time to ascertain what he or she is purchasing, or to why he or she is completing an online form, providing personal information and agreeing to terms; that is the fault of the consumer, not the service provider.
“Loan Scout SA takes great offence to anyone who suggests their services are a scam.”
Well, quite a few people do say just that, on HelloPeter, in emails to consumer journalists such as myself, and to the Consumer Goods & Services Ombudsman.
In his 2015 annual report, released recently, Ombudsman Neville Melville said that among the issues his office had referred to the National Consumer Commission for investigation was Loan Tracker SA, which he described as “advertising that it assists consumers in obtaining loans, whereas it subscribes consumers for all sorts of different things for a monthly fee”.
I followed up on this with Commission spokesman Trevor Hattingh earlier this month, who said the Commission “has assessed the matter and has escalated it for investigation”.
I will be following up on that.
John, meanwhile, is being threatened with a court summons, but for now, he’s not paying, despite being more than a little rattled.
“I’ve always been up to date with all my payments and I’ve never had to deal with legal threats. So I’ve got this fear that now somebody’s going to come to my house and take my stuff because I cannot pay this company,” John said.
"But for now I refuse to pay. In none of the calls has any representative of the company discussed how I could benefit from their services; there’s been no attempt to help or explain; no courtesy at all - nothing whatsoever except for threats…”
What to do
If you are in need of a loan be very wary of online sites which talk of loans in large print and in the hidden small print, of a telephonic advice service subscription which locks you into paying for a year.
Make that click and the money will flow away from you instead of towards you.
Always, always seek out the terms and conditions, and devour every word of them.