Moneyline Financial Services – Reckless Lender to Social Grant Beneficiaries

Social Grants as Collateral

Last year, the National Credit Regulator (NCR) referred Moneyline Financial Services to the National Consumer Tribunal for reckless lending. The Regulator discovered that the financial company had been operating in violation of the National Credit Act (NCA), by extending reckless loans to social grant beneficiaries, using their social and child grants as collateral. Moneyline Financial Services belongs to Net 1, the company that awards social grants to beneficiaries, for the South African Social Security Agency (SASSA).

The Church of Reckless Lending

Moneyline Financial Services was operating out of church in Nyanga, as a lender. Every day, hundreds of the elderly, the disabled, and young mothers would queue for hours waiting to secure loans. Those beneficiaries whose names were on Moneyline’s ‘system’ immediately qualified for loans. Subsequently, money was instantly transferred to their SASSA accounts and deductions were made every month thereafter.

No Affordability Checks

An embedded source confirmed that Moneyline Financial Services did not conduct any affordability assessments to see if the applicants could afford to repay the loans. The only requirement was to have a SASSA card. Bathabile Dlamini, the Minister of Social Development asserted that SASSA accounts, belonging to social grant beneficiaries, should be off limits to lenders. SASSA said they had attempted to dissuade social grant recipients from using their social grants to secure loans.

Hands off Our Grants!

Elroy Paulus of the Black Sash ‘Hands Off Our Grants’ campaign affirmed that the Social Assistance Act prohibits transferring, ceding or encumbering social grants in any way. As follows, Moneyline Financial Services had acted unlawfully by using child grants as loan collateral. Lending to these beneficiaries traps them in a vicious debt cycle. They are compelled to take out new loans to repay old ones and are, thus, ensnared in an unrelenting debt spiral. In this way, social grants breed poverty, instead of fighting against – the purpose for which they are intended.

Unfortunately, Net 1 was cleared of reckless lending charges. However, the Constitutional Court did rule Net 1’s contract with SASSA as unlawful. Accordingly, the company no longer handles the paying out of social grants.