On 12 September 1997 the Business Practices Committee (BPC) published its intention to investigate, in terms of section 8(1)(b)(1) of the Harmful Business Practices Act, 71 of 1988, (2) the business practice whereby "interest recalculators" (3) required payment in advance (an up-front consideration) for services to be rendered. Notice of this proposed investigation (the 1998 general investigation) was published under Notice 1325 of 1997 in Government Gazette 18263. The report of the BPC on interest recalculators was published as Report 58 under Notice 1763 of 1997 in Government Gazette 18443 dated 21 November 1997. On 23 October 1998 the Minister, in Notice 2422 of 1998 in Government Gazette 19353, declared unlawful the business practice whereby interest recalculators accept up-front payments before the rendering of such service in full. "Service fully performed" meant that the recalculator has fulfilled all the services offered to the debtor, and the creditor had agreed to or rejected any claim for disbursement in writing. The creditor had to agree to or reject the claim within 90 days after receiving the claim, failing which service is presumed to have been fully performed.

On 11 September 1997 the BPC informed Financial Research Foundation (Pty) Ltd (FRF) (4) by letter about the impending 1998 general investigation. The attorneys of FRF, WN Reyneke Incorporated (5) (Reyneke), acknowledged receipt of this letter and made a number of irrelevant allegations in its response. This letter of theirs was followed up by equally irrelevant letters dated 19 January 1998, 29 January 1998 and 3 February 1998. On 9 February 1998 the BPC responded to a letter of WN Reyneke dated 19 January 1998. The response of the BPC gives an indication of the trivial issues raised by Reyneke.

"Thank you for your letter and annexures dated 19 January 1998. You raised a great number of issues and the Committee would endeavour to respond to all of them.

1. Page 1, paragraph 2, last sentence: You stated: "This harmful business practice is being applied despite the clear provisions of various legislation to the contrary". As you are aware, the Business Practices Committee (the Committee) administers the Harmful Business Practices Act, No 71 of 1988 (the Act). The sole purpose of the Act is to make provision for the discontinuance of harmful business practices as defined in section 1. The Committee would not investigate contraventions of existing legislation. A contravention of, for example, the Companies Act, constitutes a criminal offence and this contravention needs to be investigated by the South African Police Services (SAPS). The SAPS would then prepare a dossier which will be forwarded to the public prosecutor who would decide whether or not there are sufficient grounds to prosecute. If you contend that practices are being applied that are clearly contraventions of various existing legislation, then these practices should be brought to the attention of the SAPS.

2. Page 1, paragraph 3, first sentence: You stated "... the practice clearly followed according to an undeniably design by a number of banks and/or financial instances to refuse their customers ... such information as they are required by law and/or contract to produce". If there is "... an undeniably design by a number of banks" this could constitute a contravention of Regulation 801 of 2 May 1986 which was issued in terms of the Maintenance and Promotion of Competition Act of 1979. In terms of Regulation 801 it is a criminal offence to, inter alia, collude on the terms of conditions of supply of goods or services. It is suggested that you approach the Chairman, Competition Board, Private Bag X84, Pretoria, 0001, or the SAPS about this allegation. lf this refusal constitutes a contravention of other legislation, please see 1. above. Should the refusal be in breach of a contract, the remedy lies in a civil action against the banks concerned. The Committee has wide investigative powers but only make recommendations to the Minister of Trade and Industry (the Minister) which powers he should exercise to ensure the discontinuance of a particular harmful business practice. The Minister does not have the power to intervene in a civil action between two parties.

3. Page 2, points 1 and 2. The Committee is aware that your client is not the only entity which recalculates interest and the Committee does not deny that some clients of banks could have been overcharged.

4. Page 2, points 3, 4, 5 and 6 and page 3, points 7 and 8. If banks have "... combined to apply a deliberate policy of obfuscating and delaying claims", please see 2. above. Contraventions of the Usury Act should be brought to the attention of the SAPS or the Registrar of the Usury Act. The Act does not make provision for the Committee to interpret and apply the Constitution of South Africa.

5. Page 4, last paragraph. You state "... banks are all part of a vast campaign ..." Please see the reference to the Competition Board under 2. above.

6. Page 5, points a to c. It would be worthwhile if you could quantify these allegations and bring it to the attention of the relevant authorities, such as respectively Vice-President Mbeki who is charge of the RDP programme, the Chief Director: Small and Medium Small Enterprises, Department of Trade and industry and the President of the South African Reserve Bank.

7. Page 5, point 1. The Committee has no powers to rectify this situation or to ensure that enforcement takes place. It is recommended that you bring this complaint to the attention of the Minister of Justice.

8. Page 6, points 1, 2 and page 7 point 3. Please address these requests to the Minister of Trade and Industry. It is not a function of the Committee to review or draft existing legislation.

9. Page 7, penultimate paragraph. The issues reiterated by you were in my opinion answered in the paragraphs above. However, please do not hesitate to call me should you wish to discuss any of the aspects raised above".

In another letter, Reyneke suggested that the software of FRF "... is far more advanced than anything available to any of the banks in South Africa". This remark was probably made with "tongue in cheek". Reyneke also stated that banks were "... playing other silly games", promoted "distrust" and "disrespect for the law" and were short-sighted.

The BPC received a number of complaints from consumers against FRF after publication of the notice of the 1998 general investigation. Because of the pending general investigation in terms of section 8(1)(b) of the Act, these complaints were not followed up with FRF. The following were consumers who lodged complaints against FRF during the 1998 general investigation and a brief summary of their complaints. Only the first three letters of their surnames are given.

Bes: FRF had a sloppy administration. FRF and Friedman do not return any calls.

Bot: Paid R5 400 to FRF on 13 December 1996. FRF alleged that it had problems in obtaining the required bank statements.

Bur: He and his son each paid R2 250 to FRF. His son had not heard from them yet.

Caa:        No feedback from FRF

Fer: Paid R900 to FRF on 15 January 1997 and heard nothing from them since then

Lor: Heard nothing from FRF since paying them R1 350 on 26 February 1997.

Oli: Paid RI 500 to FRF on 20 June 1997 for services to be rendered. Have heard nothing from them since then.

Rin: He had no cash and they talked her into "... putting in on my husband’s credit card. A friend of mine heard nothing after ten months. They said everything would be completed within six to eight weeks. The telephones just rang".

See: Tried to communicate with FRF for six months without success.

Sem: "They told me that they could make my bank repay me for the bond money they are owing me" and ". ..I am a pensioner and need that money".

Sen: Furnished the names of 18 persons who paid upfront fees to FRF and whose claims were rejected by the banks. They received no refunds from their so-called deposits