(Bloomberg) -- Shoprite Holdings Ltd. has been found guilty of reckless lending after a South African regulator ruled that the continent's largest supermarket chain hasn't been properly assessing shoppers before extending credit.
The retailer was fined 1 million rand ($77,425), the National Credit Regulator said in an emailed statement on Wednesday. Among other discrepancies, the Cape Town-based company took into account incomes from other people, such as spouses, when judging the ability of a borrower to repay loans, it said.
“This is the first big judgment into reckless lending and a step in the right direction in terms of ensuring regulations are upheld,” Jacqueline Peters, the NCR's manager for investigations and enforcement, said by phone. “It won't be the last,” she said, without specifying which other companies were being investigated.
The regulator is hardening its stance toward lending by retailers as many South African consumers struggle with high unemployment and reduced household incomes. Shoprite's fine related to the retailer's furniture division, where items such as sofas can be hard to pay off in one go.
Shoprite shares, trading for the first day that investors won't receive last year's dividend, fell 1.6 percent to 217.52 rand as of 10:05 a.m. in Johannesburg.
“In these tough economic times, it's especially important to look at who is extended credit and who can afford it,” Peters said.
--With assistance from Renee Bonorchis
To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net.
To contact the editors responsible for this story: Tara Patel at tpatel2@bloomberg.net, John Bowker, Vernon Wessels
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