It is illegal for so-called interest recalculation organisations to charge an upfront fee to investigate whether banks have charged you too much interest on your accounts.
The ban on the upfront fee was slapped on interest recalculators towards the end of last year by the Department of Trade and Industry's Business Practices Committee.
Following an investigation into the activities of these operators, Louise Tager, chairman of the Business Practices Committee, said the harmful nature of the recalculators' practice occurs when the recalculator accepts money in advance to recover "overcharged" interest, not knowing whether interest has in fact been overcharged at all.
Tager says the committee has evidence that although fees are paid in advance, in most cases the recovery of overpaid interest does not materialise.
Also, just because the recalculator accepts money from you, does not necessarily mean that an investigation into your account will be conducted.
"The offer to obtain the repayment of interest is often no more than a pretext to mislead consumers into handing over their money," Tager says.
"The scale of abuse in South Africa among recalculators is such that in the view of the committee it is clear that the practice of taking money in advance can on no grounds be justified in the public interest," she says.
The committee has not banned the activities of the recalculators outright, but it has noted the numerous complaints from members of the public about the services of interest recalculators.
Tager says there may have been cases and there probably could be cases where individuals have been charged too much interest by financial institutions.
If you suspect this to be the case, Tager says you should be free to use the services of recalculators. But you are a consumer, and must be protected from unscrupulous recalculators.
Where they do undertake to recalculate interest for you, they may, by arrangement with you, retain a negotiated percentage of whatever amounts they successfully recover.
Alternatively, they may negotiate a fee with you to be paid once they have rendered the service fully, she says.
Tager says the public should also be aware that the Business Practices Committee will not get involved in cases where there is a dispute over the interest rate.
Banks, painted as the "real culprits" by the recalculators, say they have refunded only 0,02 percent of the total value of all interest claims submitted by recalculators and say that none of the claims received by them related to inaccurate computer calculations.
Tager says a policy to deliberately overcharge clients on interest would be regarded as a harmful business practice, but statements made by the recalcultors that "all banks overcharge on mortgages and overdrafts" are too vague to investigate.
Tager says the suggestion by the recalculators that the government should institute a complaints avenue for consumers through an umbrella body with compulsory membership for recalculators is impractical.
"Nothing is preventing the recalculators from establishing a body to represent them. They have unsuccessfully done so in the past," she says.