Capitec says it has settled a legal dispute with Summit Financial Partners, who accused the bank of breaking the country’s credit laws, alleging it to be a ‘payday lender in disguise’.
Summit sued Capitec in early 2016, accusing it of breaking credit laws, and lending recklessly. Capitec denied the allegations.
In a statement on Friday (29 June), Capitec said that the case has been withdrawn.
“All Summit assisted and initiated court and NCR cases involving Capitec have been withdrawn. The principle contention in these cases was against the multi loan product which Capitec discontinued in February 2016.
“Both parties have agreed to work together in improving the unsecured lending industry for the benefit of all South Africans. This initiative will include programs to improve consumer financial literacy, providing effective consumer debt relief solutions and building consumer financial capability.
“We believe that this is an important joint step in bringing positive change in the South African credit industry,” the bank said.
Earlier this year, Capitec faced accusations from short seller, Viceroy, who also contributed to the scandal surrounding Steinhoff International Holdings NV.
A report by Viceroy Research accused it of concealing loan losses and underestimating bad debts. According to Bloomberg, Viceroy used court papers between Summit Financial Partners and Capitec, showing how Capitec allegedly issued reckless loans to customers, particularly on its now discontinued multiloan product.
“Capitec’s lending practices are grossly irresponsible,” Fraser Perring, founder of Viceroy Research, told Bloomberg earlier in the year. “We are being sent evidence of people committed to pay 70 percent of their net monthly income on debt.”
Viceroy “typically targets a company that’s doing well,” said Capitec CEO, Gerrie Fourie in a February interview. With “our share rising more than 50,000%. That’s what a short seller would look for – it’s the ideal company to short,” he said.