National Credit Regulator v JDG Trading (Pty) Ltd and Others (A3086/2019) [2025] ZAGPJHC 442 (7 May 2025)

Case Note

Case Name: National Credit Regulator v JDG Trading (Pty) Ltd
Citation: CaseLines CL 009-2215
Date: Judgment delivered on 8 July 2019

Reportability

This case is reportable because it examines the intersection of consumer protection and credit insurance practices under the National Credit Act 34 of 2005. The judgment addresses important issues concerning the reasonableness of bundled insurance products in credit agreements and highlights regulatory concerns about protecting vulnerable consumers. Its significance lies in its potential impact on how credit insurance is designed, marketed, and enforced, particularly when the products appear to be ineffective for certain consumer groups.

Regulatory and industry stakeholders, as well as consumer rights advocates, will find this judgment of interest because it scrutinizes how credit providers structure insurance covers and the extent to which they comply with statutory provisions. The case also raises constitutional questions regarding access to social security and the protection of disadvantaged consumers.

The decision is an important point of reference for future disputes involving credit insurance bundling and its compliance with statutory provisions under the National Credit Act.

Cases Cited

National Credit Regulator v Lewis Stores (Pty) Ltd and Another – as referenced in the judgment for its relevance to the issues of bundled versus separate insurance cover pricing and structure.

Legislation Cited

National Credit Act 34 of 2005 – Sections 90(1), 90(2)(a)(ii), 91(1), 91(2), 101(1)(A), and 106 (1) and (2) are particularly examined for compliance and interpretation.

Rules of Court Cited

No specific rules of court beyond statutory provisions were cited in this judgment, although the matter of appeal was conducted in accordance with the provisions of section 148 of the National Credit Act.

HEADNOTE

Summary

The case involves an appeal by the National Credit Regulator against a judgment delivered by the National Consumer Tribunal on 8 July 2019. The Regulator challenged the conduct of JDG Trading (Pty) Ltd, a credit lender, regarding its practice of bundling credit insurance with credit agreements. The appeal centers on whether the bundled insurance, which includes coverage for disability and retrenchment among other benefits, is unreasonable or provided at an unreasonable cost in contravention of the National Credit Act.

In arguing the case, the Regulator asserted that offering bundled insurance to consumers—many of whom, such as pensioners, disabled persons, and social grant recipients are unlikely to benefit from the insurance—constitutes conduct prohibited by the Act. The Regulator maintained that since these consumers are already in the position described by the insurance benefits, they effectively pay for cover which is functionally useless.

The judgment also discusses the participation of the Black Sash Trust in the appeal, emphasizing constitutional considerations regarding access to social security. The inclusion of amicus evidence brought into question the quality and admissibility of expert reports and highlighted the broader social impact of the insurance product, thus adding depth to the analysis.

Key Issues

The primary legal issue is whether JDG Trading’s practice of bundling credit insurance with credit agreements violates sections 106(2), 90(1) and (2), and 91(1) and (2) of the National Credit Act 34 of 2005. The case also examines whether the bundled cover is unreasonable or provided at an unreasonable cost when the actual risk and liabilities are taken into account.

A secondary issue is the extent to which the evidence from third parties, particularly that submitted by the Black Sash Trust, should influence the court’s determination on whether the insurance product is exploitative for vulnerable consumers.

Finally, the case raises constitutional issues concerning the right to access social assistance and the regulatory obligations of both the state and corporate entities in protecting this right.

Held

The Tribunal’s judgment, which the Regulator appealed, concluded that it could not find that the credit insurance cover was unreasonable or provided at an unreasonable cost. The holding rested on the determination that the Regulator had not sufficiently proven that the bundled insurance policy violated the relevant provisions of the Act.

Although the Regulator contended that the bundle rendered some aspects of the insurance cover functionally meaningless, especially for vulnerable consumer groups, the Tribunal held that it was beyond its purview to decide on the inherent suitability of bundled insurance in general.

The appeal is therefore considered in the context of whether the evidence and statutory interpretation support findings of regulatory breach, with the Tribunal ultimately dismissing the Regulator’s application for a declaration of prohibited conduct under the Act.

THE FACTS

JDG Trading (Pty) Ltd, a credit lender, required consumers seeking credit for household goods and furniture to also obtain credit insurance. The insurance was sold as a bundled package that included coverage for permanent and temporary disability as well as retrenchment. In practice, many consumers, such as pensioners and individuals already disabled or unemployed, were compelled to purchase a product that they could not meaningfully use.

The application and acceptance for credit by consumers involved the mandatory purchase of this bundled insurance, with consumers facing a choice only between the insurer provided by JDG or sourcing their own cover. It is clear from the record that the insurance policies were structured in such a way that certain categories of claimants were disadvantaged by the bundled format.

Additionally, profiles presented by the Regulator demonstrated that the inherent design of the insurance package disadvantaged vulnerable groups, who, due to the conditions for claiming benefits, were unlikely to ever benefit from the policy despite incurring its cost.

THE ISSUES

The legal question before the court was whether the practice of bundling credit insurance with credit agreements, without offering a choice of individual cover, violates the provisions of the National Credit Act. The focus was on the reasonableness of the insurance cover in relation to the actual risk and the cost imposed on the consumer, particularly of groups who could not realistically claim the benefits.

The court also needed to determine if the alleged anomaly in the insurance product—whereby disabled or retired consumers pay for benefits that they cannot possibly utilize—fulfilled the threshold for unreasonableness as prescribed in sections 106(2)(a) and (b) of the Act. This involved a detailed consideration of both the contractual and practical impacts on the consumer.

Furthermore, the inclusion of amicus evidence by the Black Sash Trust introduced a secondary issue, prompting the court to assess whether the socio-economic impact on vulnerable consumers had been adequately addressed in determining compliance with the statutory requirements.

ANALYSIS

In its analysis, the court considered the statutory framework of the National Credit Act, particularly the distinction between the permissibility of offering bundled credit insurance under section 106(1) and the limitations imposed by section 106(2). The court was persuaded that the Regulator had not demonstrated that the bundled insurance cover was unreasonable or provided at an unreasonable cost in the context of the risks associated with the credit agreements.

The court’s reasoning involved a careful examination of the design of the insurance package, noting that while the product was bundled for convenience, its structure inherently disadvantaged consumers such as pensioners and disabled individuals. However, the court found that the Regulator’s evidence did not sufficiently prove that the pricing or the structure was unjustifiable under the statutory test laid down by the Act.

Additionally, the inclusion of evidence from the Black Sash Trust and the focus on constitutional rights underscored the broader implications of the case. Nonetheless, the court maintained its view that issues raised by the Trust and comparisons with previous cases like National Credit Regulator v Lewis Stores did not furnish a basis for a revised determination concerning the unreasonableness of the insurance cover.

REMEDY

The Regulator sought a declaration that JDG Trading had repeatedly contravened the relevant sections of the National Credit Act and requested that an appropriate administrative penalty be determined by the Tribunal. The relief aimed to have these violations acknowledged and to ensure a restructuring of the credit insurance offerings to protect consumers.

The court, however, upheld the Tribunal’s decision which dismissed the Regulator’s application. As such, the remedy originally sought by the Regulator was not granted, and JDG Trading was not found to be in breach of the statutory provisions based on the evidence presented.

Ultimately, while the Regulator’s arguments highlighted serious concerns regarding consumer protection, the court’s findings maintained that the evidence did not meet the required threshold to warrant declaring JDG’s practices as prohibited conduct under the Act.

LEGAL PRINCIPLES

The judgment reinforces the principle that while credit providers may offer bundled insurance products under section 106(1) of the National Credit Act, any such bundling must not result in an unreasonable product when evaluated against the actual risk and costs incurred by the consumer. This interpretation emphasizes the need for an individualized assessment rather than a blanket application of suitability for all consumer groups.

A further legal principle established is that regulatory remedies under the Act require clear and convincing evidence of unreasonableness. The court underscored that the burden is on the Regulator to demonstrate that the cost or structure of the credit insurance deviates from what would be considered reasonable in light of the consumer’s actual circumstances and the potential for benefit.

Finally, the case illustrates the importance of reconciling statutory requirements with constitutional rights, particularly for vulnerable consumers. It reiterates that while constitutional concerns, such as the right to social security and protection from exploitation, are relevant, they must be balanced against the statutory framework governing credit agreements and insurance practices.