National Credit Regulator v Southern African Fraud Prevention Services NPC

Southern African Fraud Prevention Services NPC (SAFPS) was incorporated in 2000 as a non-profit corporation by four major banks to combat fraud in commerce. Its members include most major credit providers in South Africa. SAFPS operates the Shamwari database where members file fraud information within two business days of detection. SAFPS initially denied being a credit bureau but was later ordered to register as such following a 2011 court decision. SAFPS collects 11 categories of fraud information from members, including false identity, impersonation, false employment details, forged documents, misuse of accounts, employee fraud, insurance fraud, internet fraud, business fraud and suspected fraud. SAFPS retained this information for 10 years. The National Credit Regulator (NCR) filed a complaint with the National Consumer Tribunal alleging SAFPS contravened section 70(2)(f) of the National Credit Act 34 of 2005 (NCA) read with regulation 17, by retaining consumer credit information for longer than the permitted one-year period. The parties settled all issues except this retention period dispute. The Tribunal ruled in favor of the NCR. SAFPS successfully appealed to the Gauteng Division of the High Court. The NCR then appealed to the Supreme Court of Appeal with special leave.

• Whether fraud information held by SAFPS constitutes 'consumer credit information' as defined in section 70(1) of the National Credit Act 34 of 2005
• Whether fraud information falls within category 5 of regulation 17(1) - 'adverse classifications of consumer behaviour'
• Whether SAFPS was obliged to expunge fraud information from its database within one year in terms of section 70(2)(f) of the NCA read with regulation 17
• Whether information relevant for credit fraud detection and prevention falls outside the definition of consumer credit information by virtue of regulation 18(6)(b)
• The proper interpretation of 'adverse classification of consumer behaviour' in the context of the NCA and regulations

1. The appeal is dismissed with no order for costs. 2. The orders of the high court granting costs against the National Credit Regulator in the appeal and the cross-appeal to that court are set aside.

1. The term 'adverse classification of consumer behaviour' in category 5 of regulation 17(1) must be given the meaning ascribed to it in section 71A(4)(a) of the NCA, which includes classifications such as 'delinquent', 'default', 'slow paying', 'absconded' or 'not contactable'. 2. These classifications relate to consumer behavior in performing obligations under existing credit agreements, not fraudulent conduct when seeking to obtain credit or employment. 3. Fraud information held by SAFPS is based on objective facts and criteria (such as supplying false documents to deceive), not subjective classifications of consumer behavior, and therefore does not fall within category 5 of regulation 17(1). 4. Information that is relevant for credit fraud detection and prevention, as contemplated in regulation 18(6)(b), is expressly recognized as information credit bureaux may keep and is not subject to the expungement requirements applicable to consumer credit information under regulation 17(1). 5. Requiring expungement of fraud information after one year would undermine the ability of the financial industry to protect itself against fraud and would be contrary to the purposes of the NCA as set out in section 3, leading to insensible and unbusinesslike results. 6. A statutory body should not be ordered to pay costs where it has acted impartially, honestly and reasonably in exercising its statutory duties, even if shown to have acted incorrectly, as this would inhibit the bona fide fulfillment of its mandate.

The court noted, without definitively deciding, that regulation 18(6) might serve to excise from consumer credit information in section 70(1) the specified categories of information listed in that regulation, thereby removing any overlap between the two provisions. The court stated this construction would overcome the problem of overlap but was not developed in argument and need not be firmly decided to resolve the appeal. The court also observed that the NCA itself in section 70(3)(a) appears to contemplate that there may be information desirable for credit bureaux to keep that falls outside the definition in section 70(1), though it prohibits keeping such information unless prescribed by regulation. The court commented that the Tribunal's interpretation that all information kept by a credit bureau constitutes consumer credit information subject to expungement was inconsistent with the removal of the catch-all category 'Other' from the regulation table in 2015. The court cited Oliver LJ in Exxon Corporation stating 'It is not necessary, in construing a statutory expression, to take leave of one's common sense'.

This case is significant in South African credit law as it clarifies the scope and application of section 70 of the National Credit Act and regulation 17 regarding retention of information by credit bureaux. It establishes that fraud information collected for fraud detection and prevention purposes does not fall within the category of 'adverse classification of consumer behaviour' requiring expungement after one year. The judgment provides important guidance on statutory interpretation in the context of the NCA, emphasizing that provisions must be interpreted to achieve sensible and businesslike results consistent with the Act's purposes. The case balances consumer protection with the legitimate interests of credit providers in combating fraud. It recognizes that while consumers are protected from outdated subjective assessments of their payment behavior, objectively established fraud information serves an ongoing protective function for the credit industry and ultimately consumers. The judgment also reaffirms the principle that statutory bodies like the NCR should not be mulcted with costs when acting bona fide and reasonably in exercising their statutory duties, even if ultimately unsuccessful in litigation.