Net1 can take deductions from social grants

Following a previous court ruling that found that Net1 could not deduct funds from social grants, The High Court in Pretoria ruled on Tuesday that deductions can be made from grant recipients’ accounts as a debit order is part of the normal banking process. Net1 owns Cash Paymaster Services (CPS) who manage the distribution of social grants.

In a SENS announcement released by the company it elaborated: “This order therefore clarifies that recipients may continue to initiate debit order instructions with any service provider, including the Company and its subsidiaries, against their bank accounts for the payment of goods and services. In accordance with industry practice, recipients may also query and request the reversal of disputed debits.”

Judge Corrie van der Westhuizen said in the ruling: “Any debit order against an account at Grindrod Bank Limited (a subsidiary of Net1), or other bank institution, is made after the grant is paid into the said account, i.e. the processing of a debit order entails compliance on the part of Grindrod, or other bank, with an instruction from an account holder to pay a third party and is effected only if sufficient funds are in the said account.”

The lead up to the ruling

The ruling by the High Court follows a court application by Black Sash, and the South African Social Security Agency (SASSA), along with other applicants, who argued that the deduction of funds from grant recipients’ bank accounts was illegal.

The Black Sash clarified: “In May 2016, Department of Social Development published Regulations to the Social Assistance Act to stop deductions from the SASSA payment mechanism. The Regulations were challenged by Net1, its subsidiaries and other commercial allies. These companies argued that the SASSA bank account should not be restricted, in other words, that deductions and debit orders should continue to be facilitated from social grant beneficiaries bank accounts.

“The four court cases (which were heard at the same time) were heard on the 17th and 18th of October 2016. Net1 and some of its subsidiaries argued that the Regulations must be declared invalid.”

Following the court’s decision, Serge Belamant, chief executive officer of Net1, said: “We will continue to facilitate duly authorized payments for financial services and other products and reiterate that we do not initiate any “illegal deductions.” As verified by KPMG in their recent factual findings report, our debit orders have no preference over other debit orders, are submitted through the national payment system and are randomized in accordance with industry practice.”