Listen: Wendy talks money matters and VAT increase

Listen to today's Consumerwatch feature below, or read the full story under the podcast:

We’re not just going to be paying more for the things we buy in the shops, but the debit orders which come off our bank accounts are going to go up as well.

So in the past week or two, all of us who have debit orders will have received texts and emails alerting us to increases effective from 1st April.

East Coaster Sean Sefton was among the many to email me about this.

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“I’ve received a message from my car finance bank informing me of the intention to increase VAT as per the National Treasury announcement,” he said. “Since I bought my vehicle 2 years ago, does the contract I signed not set the vat at 14% no matter what, and the only change to my payments would be with regards to the interest rate?”

No. That extra 1% VAT doesn’t go to the companies, it goes to the government - SARS, to be exact. But here’s the thing, companies are not forced to pass on the VAT increase to their customers, some have chosen not to.

What that means for them is less income from the same price because of the higher tax fraction payable to SARS.

Once a company has decided to keep its price the same as before the April 1 increase, it cannot charge its clients the higher VAT percentage later.

But watch out for price hikes piggybacking on the VAT increase, that’s bound to happen.

Staying with money matters, the Western Cape High Court handed down a major judgement earlier this month affecting the many millions of South Africans who have steady incomes but are unbanked, for a variety of reasons.

Read: Treasury explains VAT increase for average consumer

The National Credit Act forbade credit providers from granting credit to people who were not able to produce three months’ bank statements as proof of income.

So Truworths, the Foschini Group, and the Mr Price Group brought an application against the Minister of Trade and Industry and The National Credit Regulator for the relevant regulation to be scrapped, saying it discriminated against the poorer and less privileged members of society because it was impossible for them to comply with.

Clearly those retailers want to be able to open a lot more accounts for those people, but the dropping of the bank statement requirement won’t lead to “easy credit” or reckless lending, says the law firm which acted on behalf of those retailers - they will still be legally required to do thorough affordability assessments, only now they’ll be able to be more creative in what proof of income they will accept.

The judge used the example of a flower seller in Cape Town’s Adderley Street who doesn't have a bank account but does have a reliable income and thus should be able to get credit to buy their child’s school uniform, for example.

Some people have closed their bank accounts as a means of stopping rogue debit orders taking their money, for example, but that doesn’t mean they aren’t creditworthy.

So that’s a major consumer victory for that sector of the population, who would otherwise be forced to into the clutches of the notorious money lenders, with their killer interest rates and dodgy practices, such as holding on to consumers’ IDs as a means of surety against a loan.

Lastly, I want to talk a bit about companies which charge their customers an extra fee if they choose to pay by credit card, despite it being illegal. The biggest culprits are municipalities.

Over the years I’ve had several complaints from consumers, objecting vehemently to being charged a fairly hefty fee for paying municipal bills by credit card - in eThekwini’s case, the surcharge kicks from payments of more than R2,500. This is effectively the municipality passing on its 3% to 5% bank fee on card payments, and it is contrary not only to the CPA but to Payment Association of SA - or PASA - rules as well as the service provider’s merchant agreement with their bank.

eThekwini calls the fee ““Full Admin / Bank Charges” and in Durbanite Tim Kinsey’s case, it came as a surprise extra cost of R428 when he paid a bill with his credit card via EasyPay at his local supermarket.

Listener Mark van Gelder shared with me a response he got from PASA when he complained about eThekwini’s surcharge. It went like this: “PASA has taken up the matter of Municipal Surcharging on card transactions (a practice not only contained to Ethekwini Municipality) 

“In response the municipalities referred to the Local Municipal Systems Act, which enables them to impose a “surcharge” on the services they provide.

“It is the opinion of the PASA Legal Committee that the “surcharge’’ contemplated in the Local Municipal Systems Act is not Surcharging as defined in the PASA Rules, and that this piece of legislation would therefore not enable Municipalities to impose a Surcharge on card transactions.

"PASA has accordingly engaged with National Treasury, as the primary supervisor of municipalities, in order to address Municipal Surcharging. As a result, National Treasury is currently launching an enquiry into this practice.

“PASA will continue to engage with National Treasury as well as any other relevant regulator in order to ensure that consumers who choose to pay with card receive fair treatment.”

I ran this development past EThekwini Municipality’s Head of Communications Tozi Mthethwa, who said:“EThekwini Municipality has been levying the surcharge for over 10 years. This charge relates only to customers who pay at third party points.

“The Municipality has not received any official correspondence from National Treasury on the matter.”

I know that Cape Town and Joburg municipalities also charge the surcharge, and undoubtedly others too - PASA declined to name them for me.

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