Business Maverick

LOAN SCAM

End of road for Lifestyle Direct Group boss, who now has to face the music

End of road for Lifestyle Direct Group boss, who now has to face the music
Lifestyle Direct Group’s Damian Malander. (Photos: Supplied | Images sharpened with AI)

Damian Malander has tried to quash a class action potentially involving about tens of thousands of people, but the Constitutional Court has ruled that it won’t hear his appeal, which means the high-living architect of the Lifestyle Group will face the music next year.

The alleged mastermind behind the Lifestyle Direct Group International, Damian Malander, is believed to be “jolling” in Cape Town, apparently unperturbed by his latest court loss, while the house of cards built around a scam that ensnared tens of thousands of victims falls apart.

Malander has now lost his fourth attempt to stop legal action launched against him by the Stellenbosch University Law Clinic, which means the matter is likely to proceed early next year.

The Constitutional Court has denied Lifestyle Direct’s application for leave to appeal against an earlier order, issued on 6 August 2021, that the law clinic, on behalf of eight applicants, launches a class action with an opt-out clause, meaning consumers automatically stand to benefit from its ruling, unless they choose not to.

The law clinic had originally been granted class action certification on 21 July 2021 by the Western Cape High Court. Two non-parties to the suit, LegalWise South Africa and the Payments Association of South Africa (Pasa), subsequently sought leave to intervene as amicus curiae. LegalWise lost its application but Pasa was successful.

This case is the first successful class action certification brought by a South African university law clinic.

Malander is believed to have engineered a web of companies purporting to be “loan providers” which duped consumers into signing contracts for paralegal and other “value-added” services, instead of providing actual loans.

‘Dark pattern marketing’

This is the first consumer law class action in which a court is required to deliver a certification judgment and the first for “dark pattern marketing” — a deceptive user interface crafted to trick users — in the country.

Consumers were tricked by Lifestyle Direct websites, which advertised loans — “blacklisted welcome” and “no credit checks”, which are illegal in terms of the National Credit Act — and concluded “contracts” for unwanted services without reading the terms and conditions.

They would then be hooked into a fixed-term contract of 12 months, comprising an initial subscription fee ranging from R399 to R429 and a monthly subscription of R99 for the remainder. No loans were in fact offered, but if victims failed to pay the monthly “subscription” for the value-added services, or reversed their debit orders, Lifestyle Direct’s collection agents would terrorise them into paying.

So, already desperate victims who went in search of loans online were swindled out of the little money they had because they had signed up for Lifestyle Direct’s value-added services.

The SU Law Clinic first filed the certification application with the Western Cape High Court on 13 September 2019, after being alerted to complaints from consumers about 19 websites related to Lifestyle Direct. The websites all prominently bore the word “loan” as part of their domain names — loantrackersa.co.za, loanspottersa.co.za, loanmatchsa.co.za, and so on.

During the certification application in 2021, Malander’s attorney Henno Bothma argued that the eight cases were unique to each prospective plaintiff, so could not be added to a class action.

But in his ruling, Judge Patrick Gamble said this argument “misses the point”.

“The consumers in the prospective class complain that they were misled by the websites they visited, having been referred there automatically when they accessed an online search engine such as Google looking for short-term loans. The contention that there are a series of unique factual determinations, which will be required, is actually a myth.

“The primary issue is whether the respondents’ modus operandi was the establishment of websites, which were intended to mislead innocent consumers into believing they were applying for loans when, in truth and fact, they were not.”

Malander is believed to have used his security guard and gardener as the “faces” of his business.

Stephan van der Merwe, a senior attorney at the SU Law Clinic, said Malander had initially tried to appeal against the class action certification in the high court — the same court that granted the certification — which was refused. He then took the matter to the Supreme Court of Appeal, which also refused, as did the President of the SCA. It finally went to the Constitutional Court, which refused to hear it as it had no chance of success.

“Fortunately, that means it’s the end of the road so there’s nothing now stopping us from proceeding with the matter,” Van der Merwe said.

The clinic expects to issue its first summons once all necessary notices to inform all the potential class action applicants of their right to opt-out of the action have been published.  

“The hearing date will only be determined after the pleadings have been closed, which I anticipate will probably be sometime in the first semester of 2024,” Van der Merwe said.

In legal documents presented in court, Malander’s attorneys estimated between 40,000 and 60,000 customers (read: victims) were affected. DM

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