A matter came before the National Consumer Tribunal (the NCT) where JMK Loans were using applicants’ childcare and foster grants as proof of income in their credit applications. The evidence showed that JMK Loans extended credit to consumers who received child support and foster care social grants.

The purpose of the childcare and foster grants was to be utilised for the care of the child and not for the debtor to incur credit facilities. While childcare and foster grants are in a manner of speaking income, the intention of the social aid to is ensure that the child is properly taken care of and that there is financial support in place for the child’s care.

Accordingly, the NCT found that child support and foster care social grants are income to be used for the benefit of third parties and cannot be deemed to be the consumer’s income. What is further important to note is that the NCT found JMK loans guilty of, amongst others, reckless lending.

This should serve as a warning to lenders to ensure that they follow the rules set out by the National Credit Regulator when granting credit facilities. Attempts by lending organisations to “back-door” regulations put in place to protect consumers may leave them with the short end of the stick when they attempt to enforce or recover.

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