In November last year, the Department of Trade and Industry's Business Practices Committee banned the payment of upfront fees to interest recalculators, because it is a harmful business practice. "The harmful nature of the business practice of recalculators occurs when the recalculator accepts money in advance to recover overcharged interest, not knowing what the chances of such an occurrence are," said Louise Tager, the committee's chairman.
Many people have paid hundreds or even thousands of rands to interest recalculators, in the hope of recovering large sums which interest checkers claim are the result of banks charging their clients too much interest.
Generally, the fees paid to the recalculators are for recalculation only and do not cover the costs of further action, such as litigation, as a Personal Finance reader discovered.
Reports from other readers who have engaged interest recalculators also suggest they have had great difficulty in contacting the companies once they had paid their deposits and the amount of time they have spent in pursuing the matter hardly justifies the refunds they may or may not eventually get from the banks.
Another problem that has been highlighted with the interest recalculators is that they make use of very persuasive representatives who sometimes make rash promises to individuals.
Here is a typical case.
Jeff Zieper, of Milnerton, Cape Town, was approached by an organisation called the South African Bureau for Interest Investigation to carry out an recalculation of interest on a business account.
The fee for doing the recalculation was R4 500 and 10 percent of the money paid out by the bank.
Mr Zieper made it a condition of the contract that he would pay the fee only if the bank's "mistake" exceeded R10 000. It was also agreed that no further fees would be payable.
Subsequently SA Bureau informed him that his bank had overcharged him by just over R6 800. Adding other costs and interest due from the bank, this amounted to a claim of just over R15 000.
The bank offered a final settlement of just under R3 000, and SA Bureau informed Mr Zieper that if he did not accept the settlement offer, he could litigate. But litigation costs extra.
To pursue the matter, he would have to pay R3 500 for the initial summons. Alternatively, he could have a complete audit (in addition to the interest recalculation already completed) done on his account for which SA Bureau would charge R2 940, and this would "justify his total claim", he was informed.
Mr Zieper replied that he was not interested in incurring further costs and demanded the return of his R4 500.
Following this, he did not hear from the company for a whole year, despite several attempts to contact them, until the issue was taken up by Personal Finance.
Eugene le Roux of SA Bureau for Interest Investigations denies that Mr Zieper is entitled to a refund of the R4 500 fee "as the matter has not been taken to its full conclusion".
Le Roux is adamant that the condition that the "mistake" was more than R10 000 was met, because SA Bureau for Interest Investigations submitted a claim for more than R15 000.
"It is a fact that banks make 'offers' such as in this case, of very small amounts, but eventually settle on vastly increased amounts.
"We can provide documented proof of cases where banks made offers of around R2 000 initially, but later settled at about R90 000," he says.
He says their guarantee clearly states that they pay the difference between what the bank refunds and the fee paid, which amounts to about R1 500 in Mr Zieper's case.
SA Bureau has now offered that if Mr Zieper ("since he insists on giving up during negotiations") accepts the bank's offer of about R3 000, they will refund the difference of about R1 500, and they will do a full audit at no further cost, on condition that Mr Zieper cedes 50 percent of the claim to them.
Effectively, Mr Zieper will find himself R300 poorer after this experience (unless SA Bureau successfully pursues a further audit against the bank in which case he could get more) plus he has spent an enormous amount of time and effort on this issue.
Mr Zieper is not the only one disillusioned after his dealings with an interest checking company.
Professor Louise Tager, chairperson of the Business Practices Committees, says in the committee's report on the practice that it appears from some clients of recalculators that they were not impressed with the services promised, already paid for, but not yet rendered.
"The fact that a recalculator informs a client that the client's bank overcharged on the interest payable does not guarantee that this is the case. There is no automatic refund of claims for interest 'overcharged', because the banks dispute these claims," she said.
She dismissed "as pure speculation" figures of R60 million and R200 million that recalculators claim the banks have overcharged on interest
Also, there are no estimates of what consumers lose through the recalculators efforts to recover these amounts, she said in the report.