JOHANNESBURG, Oct 27 (Reuters) - South African furniture retailer Lewis Group will pay 67.1 million rand ($4.91 million) to customers it had mistakenly sold loan insurance, the company said on Tuesday.
South Africa’s credit regulator this year pounced on furniture retailers for allegedly selling loan insurance policies to pensioners, self-employed and unemployed consumers, referring not only Lewis to the National Consumer Tribunal but also Shoprite.
In the UK the mis-selling of loan payment protection insurance (PPI) policies by banks and other financial services companies has cost the industry about 28 billion pounds in compensation and is Britain’s most expensive consumer finance scandal.
After the credit regulator informed Lewis of three such cases in July, the company undertook an internal investigation of all its insurance transactions over the last eight years, but also said it would challenge the complaint.
The furniture retailer, which sells its beds, lounge suites and televisions mostly to low-income customers on in-store credit, said in a statement on Tuesday that it found premiums of 44.1 million rand had been mis-sold since 2007.
“As a result of human error at our stores, loss-of-employment insurance products were sold to pensioners and self-employed customers contrary to our company policy,” Lewis Chief Executive Johan Enslin said in a statement.
The cases represent less than 1 percent of all insurance premiums earned by the group since 2007 and consumers will now be paid back with interest of 23 million rand, Lewis said in a filing on the Johannesburg Securities Exchange.
Around 30 percent of the erroneous transactions were with existing customers and their accounts have since been adjusted while the rest were with customers who have already settled their accounts and will be traced, the company said.
“Lewis has taken widespread corrective action and implemented further control measures to prevent any further instances of such sales taking place. The group has significantly improved its IT systems to address these matters,” the company said.
Shares in Lewis were up 1.3 percent at 63.42 rand by 1032 GMT, recovering from a 2 percent fall before the announcement. ($1 = 13.6637 rand) (Reporting by TJ Strydom; Editing by Greg Mahlich)