It’s not a loan, it’s a ‘service’

The smaller the print, the more important it is that you read it. I’ve been telling consumers that for years, and now that so many of us are transacting online, I must add: “Seek out the terms and conditions link and make that your first click.”

Minimising the chances of consumers reading the not-so-appealing Ts and Cs – either in hard copy contract form or online – has become something of an art form for most companies.

The least appealing paragraphs are often found right in the middle of a full page of small, grey, faint print, for example, and I’ve heard of the lights being dimmed in timeshare presentations shortly before the contracts are produced for signing.

Consumers in desperate need of a loan are perhaps least likely to bother with small print, which could explain why I get a steady stream of emails from people who have gone looking for a loan and ended up with a debit order or a legal demand instead.

They are required to click on a box stating that they agree to the terms and conditions of what they assume is a loan application, but accessing those require another click.

If they make that extra click, they discover that they are not, in fact, applying for a loan; they’re applying for a “convenient service package”, and payment, around R400, is due immediately their application is approved.

I daresay none of those applications for a service package are declined.

Bad news awaits those who don’t click to check out the Ts and Cs.

“Unfortunately I didn’t have time to read through a 300-page contract on my tiny phone as I was stressed due to financial problems which is why I applied for a loan in the first place,” said one.

“I then obviously did not see the part where they said they would charge me for the service because I would have not bothered with them if I saw that.”

What do they get for their spend? Telephonic legal advice, which comes with a “free” loan-seeking service.

The companies claim to submit applications to “various financial institutions” on the consumer’s behalf, but there are no guarantees that they’ll be successful, of course.

A few years ago, the companies included credit checks in the “package”, but that’s since been dropped, possibly because word has spread that the credit bureaux are required to give consumers one free credit check a year.

I think it’s safe to say that few, if any, of those who land on such sites in search of a loan knowingly agree to spend more than R400 for unspecified legal advice over the phone and to have a third party apply for a loan on their behalf – rather than actually grant them the loan and transfer money into their accounts.

Later, they either discover that their bank accounts have been debited, or if that’s unsuccessful, they get a demand for payment from a firm of attorneys, in which case “attorney and client costs” are added to the debt.

In order to prevent their accounts being debited with the same amount a year later, the contract terms require them to terminate “in a recordable form” in accordance with an email sent by the company 40 business days – two months – before the anniversary of the agreement.

While most complainants recall applying for what they thought was a loan, Hazael Gray says she’s under debt review, so she can’t get a loan, and would therefore not have applied for one.

But recently she was sent a legal demand for R584 – which included “costs” of R155 – by Worcester-based law firm Esterhuyze Inc, on behalf of a company called Loan Scout SA.

In taking up her case with the firm, I asked how and when Gray was alleged to have signed up for Loan Scout’s service.

Responding, attorney Francois Slabber said she applied last October, and he provided the IP address of the “electronic device” she allegedly used to make the online application, as well as her bank account details, which she apparently provided in her “electronic mandate”.

“Our client is not a credit provider and does not provide loans,” Slabber said.

Regarding Gray’s insistence that she did not make such an application, Slabber said his firm had advised her to draw up an affidavit confirming this, “and from there we will take further instructions from our client”.

Esterhuyze Inc has sent similar letters of demand to many other consumers, acting on behalf of several companies, including Loan Scout, Loan Connector and Loan Tracer, all operating in the same way.

Slabber confirmed to In Your Corner that all were registered companies owned by the same person, and all using the services of “Consumer Protection Act lawyers”.

When asked, telephonically, for the name and contact details of the owner, Slabber said he didn’t know offhand, and he undertook to e-mail the information to me. At the time of writing, that hadn’t yet happened.