AFRICAN Bank, South Africa’s largest unsecured lender, has said it will take the National Credit Regulator to court if the National Consumer Tribunal agrees to the regulator’s proposal that it be fined R300m for fraudulent lending.

This is possibly the largest proposed sanction in the five-year history of the credit regulator.

Although other banks have said they are not facing fines, the manipulation of affordability calculations at African Bank raises questions about how widespread this practice is.

The value of unsecured loans surged 38.4% year on year to close at R140bn in the third quarter of last year, outperforming other forms of lending and raising concern about reckless lending.

The fraudulent activity at African Bank’s Dundee branch was a result of collusion between the bank’s agents and some customers, the bank said.

African Bank Investments Limited CEO Leon Kirkinis said the fraud emphasised the need for regulators and other parties to look not only at the lenders but also the behaviour of customers.

Mr Kirkinis said there were complex syndicates that fraudulently designed pay slips, bank statements and identity documents to manipulate affordability calculations.

The fraud affected 397 customers and loans to the capital value of R15.5m, the bank said. It uncovered the fraud in an internal investigation in November 2011. The regulator announced in October last year that it was investigating several lenders.

It is not clear how and when the regulator learnt of the fraud at African Bank. Mr Kirkinis said the bank "dealt with the matter internally" before showing the regulator "our internal record".

Asked if employees were not under pressure to lend to meet the bank’s objectives, he said: "This is really something that is done for personal gain.... It’s also got to do with customers paying kickbacks. It’s not in our interest to lend to people who can’t afford."

Mr Kirkinis said he did not understand why the National Credit Regulator had recommended a fine because the bank had already suffered losses by writing off the loans.

"We were surprised ... that they were taking this to the tribunal.... If we are not happy with the outcome we still have recourse to the court and we will pursue the matter all the way," he said. "We were victims of corruption."

African Bank has close to 40% of the total outstanding unsecured credit granted in the country. In its first quarter to end-December trading update, gross advances grew from R53bn to R57bn.

Capitec, which has also been a beneficiary of the growth of this category of loans, said on Friday it had not had any fines levied against it. First National Bank said the same.

Standard Bank referred questions to the National Credit Regulator and Absa had not responded by Business Day’s deadline.

Nedbank retail risk executive Gavin Payne said there was a total segregation between credit and sales departments, and sales consultants did not finalise or influence the outcome of a deal.

Mr Kirkinis said the fraudulent events prompted the bank to halt an oversubscribed $300m bond programme. But this would not affect funding in the near term.

On Friday, African Bank shares fell just over 6%. But they pared losses to end the day down 0.33% at R30.50.

Mr Kirkinis said the bank had contacted its top shareholders about the incident and they "seemed to understand".

The National Credit Regulator did not respond to questions sent on Friday.