South Africa: Fooled, Desperate Loan Seekers File Class Action Against Online Scammers
The High Court has ruled that the Stellenbosch University Legal Clinic can pursue a class action lawsuit against Lifestyle Direct Group International.
The Legal Clinic says thousands of desperate people have been scammed via websites into believing they were applying for much-needed cash loans, but ended up with debit orders.
The individual claims are small amounts and the judge said the class action lawsuit has given ordinary workers who cannot afford sky-high litigation costs access to justice.
The University of Stellenbosch Legal Clinic has been given the green light to launch a class action lawsuit against Lifestyle Direct Group International and its affiliated websites, in an attempt to recover the money it took from thousands of loan seekers desperate.
In a judgment handed down by the Western Cape High Court on Wednesday, Judge Patrick Gamble also allowed the class action to be on an ‘opt out’ basis, meaning those who were duped will automatically be part of the litigation. , unless they specify otherwise.
In its application, the Legal Clinic argued that the respondents were not registered credit providers, but nonetheless lured unsuspecting consumers by promising them loans and loan finder services. And although they weren’t registered lawyers, they claimed to charge consumers for legal advice.
The Legal Clinic argued that this was just an “illegal scam”; that the respondents were “cunning crooks” who exploited the informality of the Internet and the financial hardships of poor consumers “to perpetrate a series of frauds on a daily basis against innocent and vulnerable people”.
Justice Gamble, in his judgment, said the legal clinic said consumers were tricked into believing they were asking for much-needed cash loans when in fact they never received no money and ended up paying a monthly payment for “legal services” which they never sought or received.
“They seek to end this sad situation by means of a class action suit and, in the meantime, by a ban,” he said.
Looking at the development of class action law in South Africa, Justice Gamble said there were already guidelines and several cases had already gone to court, including the “most famous” silicosis case. , in which miners affected by lung disease sought compensation. for work accidents.
“At the heart of class actions is access to justice for ordinary workers who cannot otherwise afford the exorbitant costs of litigation,” he said.
The judge said the clinic’s lead lawyer Stephanus van der Merwe said there were “literally thousands” of complaints from angry consumers.
All 12 websites were prominently marked with the word ‘loan’ and used the same ‘modus operandi’ to mislead customers into involuntarily signing subscription agreements with upfront fees ranging from R399 to R429 per month and then R99 for 12 months.
When providing their bank details, the aggrieved people said they thought they were asking for loans, not debit orders, and when they tried to cancel they were “stuck”.
Judge Gamble said most of those interviewed included a network of small businesses, each with physical offices located in the metropolitan area of Cape Town. They were all associated with the first responder, the “Lifestyle Direct Group”.
Another respondent was Capital Lifestyle Solutions, which operated under the name “Lifestyle Legal” and functioned as an in-house debt collection agency for the Lifestyle Group, which was used to “harass” consumers.
The faces behind the entities were Damian Malander and Nandie Piach.
The judge said all businesses were registered on the same day, May 20, 2015, and were hosted on the same server.
The legal clinic wanted to pursue four causes of action aimed at overturning the agreements and getting their money back.
The lawyers for the companies had conceded that the legal clinic had established a prima facie case, based on the pleadings, and that the legal clinic was an appropriate party to act as a “representative of the group”.
The only contentious issue was the “community and adequacy” issues.
Justice Gamble said a class action lawsuit does not require each member to have an identical cause of action or seek an identical remedy, and in that case “the scheme appears to fit the criteria of community perfectly.”
“If a class action is denied, similar, if not identical, evidence will have to be presented in separate courts by each of the thousands of class members. Given the relatively small amount involved individually, these cases would likely be spread across many and more judicial districts across the country … It would be an inefficient and unnecessary waste of resources on both sides, ”Justice Gamble said.
He said that although there were certain issues in which the concept of community was seen as “stretched”, these could be dealt with by directions from the trial judge and the proposed judicial director – a special master – appointed. to oversee the class action.
On the question of desirability, Justice Gamble said this was confirmed by the fact that the group was large with relatively small claims, some so small that they could potentially be recovered by Small Claims Court. , with the risk of multiple conclusions at odds with each other.
“Such a result is clearly not in the interests of justice,” he said.
Judge Gamble sanctioned the appointment of a “special master” to deal with the “nuts and bolts” of the class action lawsuit, including verifying claims and making payments, but said it would be up to the court of first instance to determine the precise functions of its functions.
Turning to the legal clinic’s request for an interim ban, shutting down the businesses, he said Malander had filed an affidavit stating that they had been “taken out of the national payments system” and that the websites had been put out of service and that the companies had not traded since April 2020.
Malander said there had been no demand for payment from customers and that he had “no desire to restart the business.”
Judge Gamble said the legal clinic had “cleverly prepared” for a quick response, noting that it had joined the Lifestyle Direct group “that very morning” as the case was debated before it.
A search of the files of the Companies and Intellectual Property Commission showed that several of the companies were still listed as “in operation”.
The judge, however, said he would take Malander at his word, recording his engagement as part of the court order that he “would violate at his own risk.”
Under the terms of the order, the consumers who will be part of the class action, include: “All persons who have had sums of money debited from their bank accounts and / or who have been harassed and / or threatened in connection with any request for or collection of payment by Respondents at any time from May 1, 2015 to date on the basis that they have entered into purported agreements with Respondents by submitting a request on one of the listed websites ”.
The respondents were ordered to provide the legal clinic with details of its clients.