Do credit card fees go beyond the law?
The National Credit Act (NCA) prohibits a credit provider from charging any fees or charges not listed in section 101 of the act. One of the permitted charges is a "service fee". Regulations under the act cap this fee at R60 a month, unless an exemption applies.
So, is it legal for banks to charge credit card account holders a "card fee" or a "credit facility fee" over and above a monthly service fee? If not, why has the National Credit Regulator (NCR) done nothing to stop banks from doing so?
At the beginning of last year, Standard Bank started levying a "card fee" on anyone who has a standalone credit card, which is one that is not offered as part of an account with a bundle of transactions for a set fee.
The bank said the fee was to cover the costs of "the administration and maintenance of all the value-added services and features" associated with the credit card.
At the time, Nthupang Magolego, a senior legal adviser at the NCR, said the act provided a "closed list" of fees that a credit provider was allowed to charge under a credit agreement, and a card fee was not one of them.
She said the regulator would "investigate and take appropriate action" if an illegal fee was being charged.
More than a year later, the regulator will not say whether or not it investigated the issue. It has ignored requests for comment.
All of the big five banks are now charging either a card fee or a credit facility fee on some or all of their credit cards.
Ethel Nyembe, the head of card issuing at Standard Bank, also wouldn't answer questions relating to an investigation by the regulator into the bank's credit card fees.
Credit cards provide access to certain lifestyle offerings such as access to airport lounges and cinemas.
Customers who don't want these benefits can use alternative credit offerings such as personal loans, overdrafts and certain credit cards from which such offerings are removed, says Nyembe.
Cilliers Kriel, CEO of the credit card division at FNB, says the bank's credit card is more than a credit facility. It's also a "financial services product".
"The credit card account is a financial services product as defined in the Financial Advisory and Intermediary Services Act which can be used to make deposits, withdrawals, earn credit interest, make payments either by swiping at merchants or by debit order.
"The credit facility gives the customer the option to borrow, up to an agreed limit . The credit facility is attached to and maintained in association with the credit card account."
Absa and Nedbank also separate the charges on the card account from those charged for a credit facility.
The NCA permits a credit provider to charge fees relating to the financial services agreement or account beyond those listed in the act for a credit agreement, says Kriel.
But Trudie Broekmann, an attorney who specialises in consumer law, says the act does not define a "financial services account", so it's not clear what the lawmakers intended by this.
Only if they intended to include a credit card account in the definition can the banks rely on the exemption and charge more than the R60-a-month service fee, she says.
In her opinion, the section of the act that treats the credit facility and the financial services account as separate components was drafted with an overdraft facility linked to a cheque or current account in mind. With an overdraft facility, it's clear the credit facility (the overdraft) is secondary to the financial services account (the cheque/current account) and so regarding the two as separate components does not appear to be misplaced, she says.
"In the case of a credit card account, however, the credit facility and the financial services account are one and the same and it seems artificial to regard the account and the facility as separate components subject to separate service charges."
No-one opens a credit card account without a credit facility and the primary function of a credit card account is to provide access to the credit facility, she says.
Treating them as separate components and charging you for each is like a supermarket charging you separately for an egg shell, egg white and egg yolk, she says.
Broekmann says it can be argued that the banks are in breach of the act when they charge you more than R60 a month on your credit card.
"This contention should be tested and I would be eager to represent a group of credit card holders . in taking the complaint to the National Consumer Tribunal to reach clarity on this aspect."