Retailer Shoprite’s insurance and credit arm widened its losses this year, calling the affordability of any potential settlement with the national credit regulator for reckless lending into question.

Shoprite Investments, which the national credit regulator referred to the national consumer tribunal in October, grew sales 0.94% to R925.4m during the year to June.

But burgeoning finance costs — mostly arising from interest payments on a R4.5bn bond issued in 2012 — and bad debts saw the unit fall into a pretax loss of R142.2m, deeper than the previous year’s R97.1m.

Its finance costs were more than half a billion rand.

Shoprite Investments could not respond to questions by the time of going to print.

The unit has not recognised any contingent liabilities for potential administrative penalties to the regulator, which may seek up to 10% of its sales for the preceding year.

"The company is in the process of obtaining legal advice from senior counsel, after which a potential impact can be calculated," Shoprite said.

"At this reporting date there is insufficient information to accurately determine the potential liability amount and to assess whether it is probable that the company will be liable to pay," it said.

Shoprite Investments said the regulator accused it of selling credit to consumers who could not afford it.

It did not address the regulator’s other accusations — that it sold retrenchment and occupational disability cover to pensioners; and sold retrenchment cover with a six-month waiting period on a loan with a period of six months.

In October, the regulator referred two of the grocery retailer’s units to the consumer tribunal for reckless lending.

The regulator suggested the retailer be fined.

The sale of retrenchment and occupational disability covers to pensioners and consumers receiving grants had imposed an "unreasonable cost" on them because they could not claim benefits under these covers, Jacqueline Boucher, the acting manager of investigations and enforcement at the national credit regulator, said.

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