Clothing retail group Edcon could generate close to R1-billion in additional revenue per annum after the company introduced controversial service fees for customers who use its store cards to purchase goods on credit.
Edcon has about 3.5 million cardholders and each client is required to pop out R22.80 a month. This means in a month Edcon could rake in close to R80-million and R957-million per annum from the service fees.
Edcon in its portfolio boasts retail stores such as Edgars, Edgars Shoe Gallery, EdgarsActive, CNA, Jet, Jet Mart, Boardmans, Red Square, Legit, Calvin Klein, Victoria Secret, Dr Martens, Express and Jigsaw.
Yesterday, the US-based Bain Capital Partners announced that it planned to sell Edcon in a debt-to-equity deal with the aim of reducing the company's gross debt to R6-billion from R26.7-billion.
In response to Sowetan queries yesterday, Edcon said in an email: "On 6 May 2016, revised pricing regulations pertaining to the maximum interest rates and fees charged against all credit agreements as permitted under the National Credit Act, came into effect.
"On this date Edcon reduced the interest rate charged on all interest bearing accounts by 4.4% with immediate effect, which benefits all customers with outstanding debit balances on their accounts.
"While Edcon had waived the service fee in the past, it has however become necessary to introduce a service fee relating to the full administration of credit accounts."
Edcon said having taken into consideration the financial impact that the service fee would have on customers, it has capped the fee at R22.80 a month, which equates to an annual fee of R273.60, as opposed to the prescribed maximum fee of R60 allowed per month by the NCA (R720 annually).
The firm said it has been notifying customers about the introduction of the service fee since December 2015 and again on June 3 2016, 30 days before introducing the fees.
"Since July 2016, customers had the option of either accepting or declining the service fee charge when prompted to do so in store.
"Where a customer's credit account reflects either a positive credit or zero balance, the service fee will not be levied against their account," said the spokesperson.
Customers who spoke to Sowetan yesterday were unimpressed. Cardholder Nokwazi Mbatha said the introduction of new fees was unfair because Edcon clients are already paying for other additional fees, like insurance.
"I love having the Edcon credit account because it covers me for all my clothing needs and I am able to get clothes for my family," she said.
Another customer, Nomvula Mokoena, said it was wrong for Edcon to introduce the fees.
Fury over Edgars fees
Clothing retail group Edcon could generate close to R1-billion in additional revenue per annum after the company introduced controversial service fees for customers who use its store cards to purchase goods on credit.
Edcon has about 3.5 million cardholders and each client is required to pop out R22.80 a month. This means in a month Edcon could rake in close to R80-million and R957-million per annum from the service fees.
Edcon in its portfolio boasts retail stores such as Edgars, Edgars Shoe Gallery, EdgarsActive, CNA, Jet, Jet Mart, Boardmans, Red Square, Legit, Calvin Klein, Victoria Secret, Dr Martens, Express and Jigsaw.
Yesterday, the US-based Bain Capital Partners announced that it planned to sell Edcon in a debt-to-equity deal with the aim of reducing the company's gross debt to R6-billion from R26.7-billion.
In response to Sowetan queries yesterday, Edcon said in an email: "On 6 May 2016, revised pricing regulations pertaining to the maximum interest rates and fees charged against all credit agreements as permitted under the National Credit Act, came into effect.
"On this date Edcon reduced the interest rate charged on all interest bearing accounts by 4.4% with immediate effect, which benefits all customers with outstanding debit balances on their accounts.
"While Edcon had waived the service fee in the past, it has however become necessary to introduce a service fee relating to the full administration of credit accounts."
Edcon said having taken into consideration the financial impact that the service fee would have on customers, it has capped the fee at R22.80 a month, which equates to an annual fee of R273.60, as opposed to the prescribed maximum fee of R60 allowed per month by the NCA (R720 annually).
The firm said it has been notifying customers about the introduction of the service fee since December 2015 and again on June 3 2016, 30 days before introducing the fees.
"Since July 2016, customers had the option of either accepting or declining the service fee charge when prompted to do so in store.
"Where a customer's credit account reflects either a positive credit or zero balance, the service fee will not be levied against their account," said the spokesperson.
Customers who spoke to Sowetan yesterday were unimpressed. Cardholder Nokwazi Mbatha said the introduction of new fees was unfair because Edcon clients are already paying for other additional fees, like insurance.
"I love having the Edcon credit account because it covers me for all my clothing needs and I am able to get clothes for my family," she said.
Another customer, Nomvula Mokoena, said it was wrong for Edcon to introduce the fees.
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