The National Credit Regulator (NCR) has accused Mr Price Group of contravening sections of the National Credit Act, an allegation the retailer denies.
The matter, which has been referred to the tribunal to mete out appropriate punishment, could cost the fashion group up to 10% of its annual turnover.
The NCR said on Thursday that Mr Price Group had been charging club fees to its credit customers. The charging of a club fee on a credit agreement is not permitted by the National Credit Act.
“The regulator has already referred several retailers to the tribunal for this conduct,” said NCR senior legal adviser Nthupang Magolego.
“Investigations into the cost of credit are being conducted across the credit industry.”
Edcon is facing the tribunal for an identical breach.
Included in the relief sought by the NCR are an order to force Mr Price Group to refund the affected consumers, an interdict to stop the retailer from charging those fees and the imposition of an administrative fine.
Mr Price Group said for the year to April 1 2017, club fees charged by Milady’s represented 0.1% of the group’s turnover.
“Initial legal advice is that the NCR has no rational basis for the relief sought ... an opposing affidavit will be filed by the deadline of June 8,” said the group.
Cratos Wealth assistant portfolio manager Lee Kern said investors had initially sent the Mr Price Group share price down after the news broke.
“When the announcement came out on Bloomberg, the share price fell, but it came back all the way up to R150 — higher than it was before the statement. I think the market calmed down, partly due to the fact that credit sales don’t make up a huge chunk of Mr Price’s business,” Kern said.
Mr Price’s share price initially dropped more than 1% before recovering to close only 0.33% lower at R149.51.
In the Edcon matter, CEO Bernie Brookes said the club fee gave customers value and access to benefits far greater than the money they paid.
Brookes said he believed that the finding by the NCR would be retracted through the continuing appeal process.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.