South African mobile money and payments company  Net1 UEPS Technologies is in trouble today, as the National Credit Regulator (NCR) has asked the National Consumer Tribunal to revoke the lending licence for one of subsidiaries, Moneyline Financial Services.

Moneyline has been accused of lending irresponsibly by treating social grant payments as earned income on loan applications.

Net1 CEO Serge Belamant issued a statement today strongly denying the accusations and claiming that the NCR behaved improperly by issuing a press release about the case before presenting the findings of their investigation to Net1 for comment.

The complaint was originally brought by activist group Black Sash, which accused Net1 of using data about grant recipients held by another subsidiary, Cash Paymaster Services (CPS), to market Moneyline services. CPS administers payments on behalf of the South African Social Security Agency (SASSA) and is a core part of the Net1 business.

“Data collected in all nine provinces reveal that repayments for credit have been debited from SASSA beneficiaries’ bank accounts, in the order of 10% to 97% of monthly grant payments,” Black Sash wrote in a blog post, “Regrettably, access to the social-grant beneficiaries’ database was facilitated by the outsourced contract between CPS and SASSA.”

Net1 has denied any wrong-doing, but the National Credit Regulator (NCR) has applied to the National Consumer Tribunal to have the registration of Moneyline Financial Services cancelled for breaching of the National Credit Act 34 of 2005.

NCR conducted an investigation into Moneyline Financial Services, and found that it “granted credit to consumers receiving child support grants and foster child grants meant for the upkeep of children which grants were used as income for assessing the consumers’ ability to repay credit.”

It also found that Moneyline Financial Services allegedly gave, without checking debt repayment history or taking into account their monthly living expenses, credit to consumers who received social grants.

“The credit agreement provided by Moneyline Financial Services to consumers is not in the prescribed form and does not contain crucial information about the rights and obligations of consumers,” NCR said in a press statement.

However, Net1 has refuted all claims and said that investigation and subsequent report by the NCA is “riddled with factual inaccuracies.”

Belamant said in his statement that the company has been playing by the rules and audit documentation is freely available.

“We strongly deny any contravention of the NCA and will oppose the NCR’s application. As a South African and US-listed public company, we adhere to stringent internal controls and compliance procedures and we are subjected to regular internal and external audits all of which are documented and accessible for review by any regulator.”

Net1 has recently been attempting to diversify its business away from its core operations around social grants and introducing mobile payment services such as its one-time-use virtual credit card app, VCPay. It’s seen as a potential major player in the overall movements to introduce cashless payments en masse in South Africa, because CPS already issues payments to biometrically signed smartcards and the firm’s payment technologies are widely available at point of sale readers in stores.

[Image – CC by 2.0/penguincakes]